Question

Lance has $390,000 saved and is planning to use this to supplement his income. He plans to withdraw $35,000 each year until his savings runs out. How many years from today will he run out of money if heearns 2.6% interest on his savings

Answer 1

Answer:

the number of years is 13.33 years

Explanation:

The computation of the number of years is shown below:

As we know that

Money withdrawn = (Principal × interest rate) ÷ (1 - (1 + interest rate)^-number of years)

$35,000 = ($390,000 × 2.6%) ÷ (1 - (1 + 2.6%)^-number of years)

(1 - (1 + 2.6%)^-number of years) = 1 - 0.2879 = 0.710

Now take the log both the sides

n = - (log  0.710) ÷ ( log  1.026)

= 13.33 years

hence, the number of years is 13.33 years