Question

As a gift from your parents, you just received $50,000 for your education. You can earn an annual rate of 8% on your investments. How much can you withdraw each year (end of year) for the next 4 years just using up the $50,000?

Answer 1

Answer:

annual withdrawal = $15096.04

Explanation:

given data

present value = $50,000

annual rate = 8%

time = 4 year

to find out

How much can you withdraw each year

solution

we find here annual withdrawal amount that is express as

annual withdrawal = $\frac{present\ value}{\frac{1-(1+r)^{-t}}{r}}$   ................1

here r is rate and t is time

so put here value we get

annual withdrawal = $\frac{50000}{\frac{1-(1+0.08)^{-4}}{0.08}}$  

annual withdrawal = $\frac{50000}{3.31212}$

annual withdrawal = $15096.04