Question

You want to be able to withdraw $40,000 each year for 15 years. Your account earns 6% interest. a) How much do you need in your account at the beginning? $ b) How much total money will you pull out of the account? $ c) How much of that money is interest? $

Answer 1

Answer:

a) I need to have $315789.47 in my account at the beginning.

b) A total of $600,000, I will pull out of the account.

c) The total amount of interest that I get is $284210.53.

Step-by-step explanation:

I want to be able to withdraw $40,000 each year for 15 years.

So, in 15 years I will withdraw $(40,000 × 15) = $600,000

Let us assume that I will need in my account $x at the beginning.

If the account earn 6% simple interest, then from the condition given we can write $x[1+\frac{15 \times 6}{100} ] = 600,000$

⇒ $x[1+0.9] = 600,000$

⇒ x = $315789.47

Therefore, the interest that I get for 15 years will be $(600,000 - 315789.47) = $284210.53.

a) I need to have $315789.47 in my account at the beginning.

b) A total of $600,000, I will pull out of the account.

c) The total amount of interest that I get is $284210.53. (Answer)