Your aunt has $500,000 invested at 5.5%, and she now wants to retire. She wants to withdraw $45,000 at the beginning of each year, beginning immediately. When she makes her last withdrawal (at the beginning of a year), she also wants to have enough left in the account so that you can make a final withdrawal of $50,000 at the end of that year (her last withdrawal is at the beginning of the year, your withdrawal is at the end of that same year). What is the maximum number of $45,000 withdrawals that she can make and still have enough in the account so that you can make a $50,000 withdrawal at the end of the year of her last withdrawal

Respuesta :

Answer:

She would be able to withdraw 17 times

Explanation:

Here rate (or I/YR) = 5.5%

PV = $500,000 and FV = 50,000. PMT = 45,000. We have to find N

Using excel's "nper" function. As the withdrawals are made at the start of each period it is a case of annuity due and so we will use Type 1 in excel.

NPER(5.5%, -45000, 500000, 50000, 1)

This gives us a figure of 17.22. This will be rounded to nearest number i.e. 17.

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