Question

Suppose you earned a $275,000 bonus this year and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years? Select one: a. $28,532 b. $29,959 c. $31,457 d. $33,030 e. $34,681

Answer 1

Answer:

withdraw = 28532.45

so correct option is  a. $28,532

Explanation:

given data

earned = $275,000 bonus

interest rate = 8.25% per year

time = 20 year

to find out

How much could you withdraw at the end of each of the next 20 years

solution

first we find here Cumulative discount factor that is express as

Cumulative discount factor = $\frac{(1-(1+r)^{-t}}{r}$   .............1

put here value r is rate and t is time

Cumulative discount factor = $\frac{(1-(1+0.0825)^{-20}}{0.0825}$

Cumulative discount factor =  9.638148

so here

withdraw = Present amount ÷ cumulative discount factor   .......2

put here value we get

withdraw = $\frac{275000}{9.638148}$

withdraw = 28532.45

so correct option is  a. $28,532