Question

Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years?

Answer 1

Step-by-step explanation:

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Answer 2

At the end of each year $28,532.3 can be withdrawn.

Amount Inherited = $275,000 (Given)

Rate of interest = 8.25% = .0825 (Given)

Time = 20 years (Given)

Therefore,

Present Value = P ((1-(1+R)`-n) / r)

Substituting the values -

275,000 = P ((1-(1+.0825)`-20) /.0825)

275,000 × 0825 = P (1-(1/1.0825)`20)

22687.50 = P ((1.0825^20 - 1) / (1.0825`20))

22687.50 = P (4.8816-1 / 4.8816)

22687.5 = P (3.8816 / 4.8816)

P = 22687.5 × (4.8816 / 3.8816)

P = 28,532.3

Therefore, at the end of each year $28,532.3 can be withdrawn.