Question

You estimate that by the time you retire in 35 years, you will have accumulated savings of $2

million. If the interest rate is 8% and you live 15 years after retirement, what annual level of expenditure

will those savings support?​

Answer 1

Answer:

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Answer 2

Given:

No. of years to retirement =35 years

Savings= 2 $

Interest rate= 8%

No. of years lived after retirement= 15 years

To Find:

The Annual level of expenditure will those savings support

Solution:

The Present value

$= Annuity\times[1-\dfrac{1}{(1+rate)^{periods} } ]/rate\\2,000,000=Annuity\times[1-\dfrac{1}{(1+0.08)^{15} }]/0.08]$

$2000000=Annuity\times\dfrac{[1-0.3152]}{0.08}\\2000000=Annuity\times8.559$

$Annuity= 233,659.09$

The Annual level expenditure is 233,659.09.