Moses' goal, when he retires from work in seven years, is to have $400,000 in his Retirement Fund. Assuming he achieves his goal and the fund earns 7% compounded semi-annually after he retires, what is the amount that Moses will be able to take out of his Retirement Fund at the end of every six months for 25 years after he retires?

Question

Quizplus · Accepted Answer

The correct answer is A.The amount that Moses will be able to take out of his Retirement Fund at the end of every six months for 25 years after he retires is $17,053.The formula for calculating the amount of money that can be withdrawn from a retirement fund at the end of each period is:A = P * (r / n) / (1 - (1 + r / n)^(-nt))where:A = the amount of money that can be withdrawn at the end of each periodP = the principal amount (the amount of money in the retirement fund at the time of retirement)r = the annual interest rate (as a decimal)n = the number of times per year that interest is compoundedt = the number of years over which the money will be withdrawnIn this case, P = $400,000, r = 7% = 0.07, n = 2 (since interest is compounded semi-annually), and t = 25.Plugging these values into the formula, we get:A = 400,000 * (0.07 / 2) / (1 - (1 + 0.07 / 2)^(-2 * 25))= 400,000 * 0.035 / (1 - (1.035)^-50)= 400,000 * 0.035 / (1 - 0.358)= 400,000 * 0.035 / 0.642= $17,053.27Therefore, the amount that Moses will be able to take out of his Retirement Fund at the end of every six months for 25 years after he retires is $17,053.

Moses' Goal, When He Retires from Work in Seven Years