Question

1. Your friend wants to retire and has $375,000. She expects to live for another 25 years, and she also expects to earn 7.5% on her invested funds. How much could she withdraw at the beginning of each of the next 25 years and end up with zero in the account

Answer 1

Answer:

Annual withdraw= $33,641.50

Explanation:

Giving the following information:

PV= $375,000

n= 25 years

i= 7.5%

To calculate the annual withdrawal, we need to use the following formula:

Annual withdraw= (PV*i) / [1 - (1+i)^(-n)]

Annual withdraw= (375,000*0.075) / [1 - (1.075^-25)]

Annual withdraw= $33,641.50