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Serggg [28]
3 years ago
7

Prof. Business will have $1,600,000 saved up by retirement at age 65. The retired professor expects to live 20 more years after

retiring. How large of an annual annuity withdrawal can Prof. Finance make at the beginning of each year under this scenario from an account paying 6.5% compounded annually?
Business
1 answer:
Paul [167]3 years ago
5 0

Answer:

$136348.618

Explanation:

Given:

Present value (PV) =$1,600,000

Number of year(n) = 20

Rate(r) = 6.5% = 6.5 / 100 = 0.065

Payment monthly (PMT) = ?

Calculation:

PMT = PV[\frac{r}{1-(1+r)^{-n}} ][\frac{1}{1+r} ]\\=1,600,000[\frac{0.065}{1-(1+0.065)^{-20}} ][\frac{1}{1+0.065} ]\\=1,600,000[\frac{0.065}{1-0.283797} ][0.93897 ]\\=1,600,000[\frac{0.065}{0.71620} ][0.93897 ]\\=1,600,000[0.0907567719 ][0.93897 ]\\=1,600,000[0.0852178861]\\=136,348.618

So, Payment per month = $136348.618

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