Question 3 of 10 5Points You have $400,000 saved for retirement. Your account earns 5% interest....

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Question 3 of 10 5Points You have $400,000 saved for retirement. Your account earns 5% interest. How much will you be able to

Answer 1

Answer #1

Formula to calculate present value of annuity
Present value of annuity	Annuity amount*(1-[(1+r)^-n))/r

where r is interest rate and n is number of years

Using the present value of annuity formula we can calculate the monthly withdrawal for 25 years
Present value of annuity	$400,000
Monthly interest rate	0.42%	5%/12
No of payments (n)	300	25*12

Calculation of annuity amount is shown below
Annuity amount	400000/(1-(1.0042^-300))/0.0042
Annuity amount	400000/171.06005
Annuity amount	$2,338.36

Thus, monthly withdrawal would be $2,338.36.

Answer 2

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