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

Answer:

each withdrawal will be for : $ 11,429.58

Explanation:

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

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV  $50,000.00

time 4 years

rate          6% = 6/100 = 0.06

$50000 \div \frac{1-(1+0.06)^{-4} }{0.06} = C$

C  $ 11,429.575