Question

Step 1 Before we can use a financial calculator, we must first find the expected real, or inflation-adjusted, rate of return. The real rate is calculated as follows: Real rate= (1 + OMV1 + Inflation) - 1.0 8.00% 3.00% 70 Inflation 77 1 low) 72 Real rate 73 Real rate 74 Real rate (1 +Inflation) 1.03 - 1.0 1.08 ? 76 Step 2 77 Now we have all the inputs needed to solve this problem with the financial calculator. 78 END 79 N 801 81 PV $1,000,000 82 FV 83 PMT #VALUE! 84 This amount needs to be adjusted for inflation during the year because this amount is in beginning of year dollars, so this PMT amount must be multiplied by 1 +Inflation rate. The initial withdrawal should be 85 calculated as follows: PMT x (1 + Inflation) #VALUE! 88 PMT 90 Your uncle's first withdrawal to be made in one year would be $81,632.3 92 Use Amortization Schedule and Excel's Goal Seek Function Goal Seek Age at Bez of Year Year Yea 55 66 Withdrawal Beginning Beginnine Interest Earned Made at End Balance During Year Of Year Ending Balance $1,000,000.00 $80,000.00 $81,632.38 $998,367.62 998 367 62 $79,869.41 24.081 35 994.155.68 994.155.68 $79.532.45 5.603.79 987,084.35 987,084.35 $78,966.75 89 201.90 9 76,849.20 976,849.20 $78,147 94 91.877.96 963.119.17 963,119.17 $77,049.5394,634.30 945,534.41 5-15 Annual Monthly Compound 5-16 EFF Set cela End of By changing cell: 56 OK Cancel 67 68 89 70 71 5-17 Days in a Year 5-18 Amortization 67 69 100 | 5-14 IRR Web

Answer 1

Fomulas used

A в IDEE 1000000 1 2 3 Amount 1.08 period 1.03 Rate interest Inflation 20 0.048543689 PMT $79,254.73 REAL interest 1.048543689 000 au AGE Year 66 67 68 69 11 12 70 71 13 72 14 15 73 74 16 17 18 19 20 21 75 76 77 Beg. balance Intersest withdrawal prin. withdraw 1000000 48543.68932] $79,254.73 $30,711.05 21 $969,288.95 47052.86187 $79,254.73 $32,201.87 3 $937,087.08 45489.664151 79254.7348 $33,765.07 4 $903,322.01 43850.58305 79254.7348 $35,404.15 5 $867,917.86 42131.93491| 79254.7348| $37,122.80 61 $830,795.06 40329.85724| 79254.7348 $38,924.88 7 $791,870.18 38440.30007 79254.7348 $40,814.43 8 $751,055.75 36459.01683 79254.7348 $42,795.72 91 $708,260.03 | $34,381.55 | 79254.7348 $44,873.18 10 $663,386.85 $32,203.25 79254.7348 $47,051.49 11$616,335.36 $29,919.19 79254.7348 $49,335.54 12l $566,999.82 $27,524.26 79254.7348) $51,730.47 131 $515,269.34 | $25,013.07 79254.7348| $54,241.66 14 $461,027.68 | $22,379.98 79254.7348 $56,874.75 15| $404,152.93| $19,619.07 | 79254.7348|| $59,635.66 16$344,517.27 $16,724.14 79254.7348 $62,530.60 171 $281,986.68 $13,688.67 79254.7348 $65,566.06 18 $216,420.62 $10,505.86 79254.7348 $68,748.88 191 $147,671.74 $7,168.53 79254.7348 $72,086.20 20 $75,585.53 $3,669.20 79254.7348 $75,585.53 closing $969,288.95 $937,087.08 $903,322.01 $867,917.86 $830,795.06 $791,870.18 $751,055.75 $708,260.03 $663,386.85 $616,335.36 $566,999.82 $515,269.34 $461,027.68 $404,152.93 $344,517.27 $281,986.68 $216,420.62 $147,671.74 $75,585.53 ($0.00) 78 79 22 80 23 24 81 82 83 25 26 84 85 27 28

Real Interest Rate =B2/B3

PMT :- =PMT(D3,D2,-D1)

Interest Amount :- =C8*$D$3

PRINCIPAL WITHDRAWAL​ :- =E8-D8

Closing balance :- =C8-F8

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