Ask Question
Advanced Placement (AP)Advanced Placement (AP)
3 June, 00:18

You inherit $500,000 from your parents and want to use the money to supplement your retirement. You receive the money on your 65th birthday, the day you retire. You want to withdraw equal amounts at the end of each of the next 25 years. What constant amount can you withdraw each year and have nothing remaining at the end of 25 years if you are earning 6% interest per year? a. $20,000 b. $28,489 c. $33,574 d. $39,113

+1
Answers (1)
  1. 3 June, 01:59
    0
    Since nothing remains after 25 years, future value is 0

    Present value is $500000

    As he withdraws equal amounts yearly, we use the formulae for present value of annuity. We can treat 25 years as annuity.

    P = PMT x ((1 - (1 / (1 + r) ^ n)) / r)

    Where:

    P = the present value of an annuity stream

    PMT = the dollar amount of each annuity payment

    r = the interest rate (also known as the discount rate)

    n = the number of periods in which payments will be made

    Present value of annuity (6%, 25 yrs) = P (1 - 1 / (1+0.06) ^25 / 0.06)

    500000 = P ((1-1/4.291) / 0.06)

    P is the periodic payment annually

    Equating this with the total present value

    500000 = P x (12.782)

    P = 500000/12.782

    P=39117

    Answer should be d) $39113
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You inherit $500,000 from your parents and want to use the money to supplement your retirement. You receive the money on your 65th ...” in 📘 Advanced Placement (AP) if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
In comparison to abstinence-only education programs, students of comprehensive sex education classes A) are more likely to report adolescent pregnancies. B) are more likely to have sexual intercourse.
Answers (1)
Consider the Mexican-American War. Explain one justification that supporters of the war would use. Explain one argument against the war that opponents would use.
Answers (1)
The internal capital market deals with the allocation of internally generated cash between a. stockholders, creditors, and corporate capital projects. b. stockholders and managers. c.
Answers (1)
Remember from the buffering capacity note, tell me which of the following acids (and their salts) can make the best buffered solution to maintain the pH as close to 4.30 as possible. a. Chloroacetic acid (Ka = 1.35 x 10^-3) b. Propanoic acid (Ka = 1.
Answers (1)
I need to now The cells of plant cells and animal cells.
Answers (1)
New Questions in Advanced Placement (AP)
You are given a steak. how cooked do you want it? blue rare medium rare medium medium well well done rock solid wait im a cow oh no
No Answers
The Sun appears to move across the sky during the day. The best explanation for this apparent motion is that Earth is
Answers (2)
In about what percent of home robberies does the victim know the offender? A. less than one percent (i know this isnt right.) B. Fifteen percent C. Forty percent D. Eighty percent
Answers (1)
According to Gordon Allport, which type of personality are the most dominant?
Answers (1)
Cynthia uses clean hands to package an instrument. Her goal is to reduce the risk of microorganism transmission to the product she is packaging.
Answers (2)
Home » Advanced Placement (AP) » You inherit $500,000 from your parents and want to use the money to supplement your retirement. You receive the money on your 65th birthday, the day you retire. You want to withdraw equal amounts at the end of each of the next 25 years.
Sign Up Forgot Password?