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Your aunt wants to retire and has $375,000. She expects to live for another 25 years,...

Your aunt wants to retire and has $375,000. She expects to live for another 25 years, and she also expects to earn 7.5% on her invested funds. How much could she withdraw at the beginning of each of the next 25 years and end up with zero in the account?

a.

$29,729.70
b.

$32,859.14
c.

$34,502.10
d.

$31,294.42
e.

$28,243.21
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Answer #1

Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

375000=1.075*Annuity[1-(1.075)^-25]/0.075

375000=Annuity*11.9829668

Annuity=375000/11.9829668

=$31294.42(Approx).

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