Question

Suppose your rich uncle gave you $50,000, which you plan to use for graduate school. You will make the investment now, you expect to earn an annual return of 6%, and you will make 4 equal annual withdrawals, beginning 1 year from today. Under these conditions, how large would each withdrawal be so there would be no funds remaining in the account after the 4th withdrawal?

Answer 1

each withdrawal will be for : $ 11,429.58

Step-by-step explanation:

we will calcualte the cuota of an annuity of 4 payment with a present value of 50,000 discounted at 6%

`PV / (1-(1+r)^(-time) )/(rate) = C\\`

PV $50,000.00

time 4 years

rate 6% = 6/100 = 0.06

`50000 / (1-(1+0.06)^(-4) )/(0.06) = C\\`

C $ 11,429.575