Your father has $500,000 invested at 8%, and he now wants to retire. He wants to withdraw $50,000 at the end of each year, begin

Question

4 years ago

11

ning at the end of this year. How many years will it take to exhaust his funds, i.e., run the account down to zero

1 answer:

Julli [10] · Answer 1 · 2021-11-25T15:41:53+03:00

Answer:

The number of years is about 21 years

Explanation:

A scheme that allows the withdraw fixed amount of money for a number of years is referred to as annuity

The number of years required to exhaust the fund can be determined using the present of annuity formula

PV = A × (1 - ((1+r)^(-n))/n)

where- PV- Present value, A- annual cash flow, n- number of years , r- interest rate

500,000= 50000 × (1- (1.08)^(-n)/0.08

500,000/50,000= (1- (1.08)^(-n)/0.08

10 =(1- (1.08)^(-n)/0.08

n = 21

The number of years is about 21 years