Question

Problem 4 and 5-4 Future Value and Number of Annuity Payments Your client has been given a trust fund valued at $1.61 million. She cannot access the money until she turns 65 years old, which is in 20 years. At that time, she can withdraw $19,500 per month If the trust fund is invested at a 4 percent rate, how many months will it last your client once she starts to withdraw the money? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Answer is complete but not entirely correct. Number of 284.25 months
please dont round decimals until the final answer

Answer 1

FV = PV x (1 + r)ⁿ = 1,160,000 x (1 + 4%)²⁰ = $ 2,541,703

This will be the size of kitty available for withdrawal at the time of retirement.

Hence, at the time of retirement, PV = $ 2,541,703

Monthly withdrawals = PMT = -19,500

Rate = interest rate / month = 4% / 12 = 0.333%

Fv = 0

Hence, Number of months this periodical withdrawal can continue = NPER (Rate, PMT, PV, FV) = NPER (0.333%, -19500, 2541703, 0) = 171.22 months

Hence, please enter 171.22 in the answer box.