Question

Sine has an RRSP that already contains $100,000. She intends to make deposits of $600 at the end of each month for the next 25 years into this RRSP (which pays interest at 8% compounded monthly). When she retires in 25 years (at the age of 65). she intends to withdraw monthly (end of month) payments for the next 30 years (until she is 95). What is the amount of the monthly withdrawal if the RRSP earns 6% compounded semi-annually after she retires? OA) 8788.92 OB) 6342.34 OC) 12323.34 OD) 7760.27

Answer 1

rate positively..

	this is two step problem .. First we have to compute the future value of the amount invested
	Put in calculator
	PV		-100000
	PMT		-600
	I	8%/12	0.6667%
	N	25*12	300
	Compute FV	$1,304,633.43
	we have to compute the semiannual rate to annual rate and then monthly rate
	Annual rate =	(1+6%/2)^2-1
			6.09%
	Annual rate compounding monthly=	((1+6.09%)^(1/12)-1)*12
				5.93%
	Now, we have to compute the monthly withdrawal. Put in calculator
	FV		$0.00
	PV		($1,304,633.43)
	I	5.93%/12	0.49%
	N	30*12	360
	Compute PMT	$7,760.27
	Ans =		$7,760.27