Question

A person invests $50,000 in an investment that earns 6 percent. If $5,648 is withdrawn each year, how many years will it take for the fund to run out? Round to the nearest whole year. Round Present value of Series of Equal Amounts in intermediate calculations to four decimal places.

Answer 1

Answer:

13 years

Explanation:

As for the provided information, we have

Present value annuity factor required = $\frac{50,000}{5,648} = 8.8526$

Now provided interest rate = 6%

With this interest rate as in the future values for a series of same amount , we see that for 13 years the value = 8.8526

This can even be calculated as follows:

$\frac{1}{(1 + 0.06)^1} + \frac{1}{(1 + 0.06)^2} + \frac{1}{(1 + 0.06)^3} + \frac{1}{(1 + 0.06)^4} + .................. + \frac{1}{(1 + 0.06)^1^3}$

As with this we can confirm our answer.

Therefore, number of years = 13 years.