Question

Tameshia deposits $5500 in her retirement account every year. If her account pays an average of 6% interest and she makes 38 deposits before she retires, how much money can she withdraw in 20 equal payments beginning one year after her last deposit?

Answer 1

Answer:

Each equal witdrawal= $37,373.66

Explanation:

Giving the following information:

Tameshia deposits $5500 in her retirement account every year.

Her account pays an average of 6% interest and she makes 38 deposits before she retires.

First, we need to calculate the final value of the 38 deposits. We will use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit= 5,500

i= 0.06

n=38

FV= {5,500*[(1.06^38)-1]}/0.06= $747,473.13

20 withdrawals:

747,473.13/20= $37,373.66