Homework Answers
The problem is executed in an excel spreadsheet.
Each Semi annual withdrawal amounts to $39,500 approx.
Below is given the excel formula used.
| Steps: | Values |
| Annual savings | 9000 |
| Years of investment | 22 |
| Nominal interest Rate | 0.05 |
| Effective annual interest rate | =EFFECT(D4,12) |
| Future Value of savings for 22 years | =FV(D5,D3,-D2,0,0) |
| Value of savings at the beginning of 19th year | =-PV(D5,4,0,D6,0) |
| Nominal monthly interest rate | =D4/12 |
| Effective semi annual interest rate | =((1+D9)^6)-1 |
| Value of fund left after all withdrawal | 6000 |
| Number of semi annual withdrawals | 8 |
| Each Semi annual withdrawals amount | =PMT(D10,D12,-D8,D11,0) |
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