On the day you retire you have $1,000,000 saved.You expect to live another 25 years during which time you expect to earn 6.19% on your savings while inflation averages 2.5% annually.Assume you want to spend the same amount each year in real terms and die on the day you spend your last dime.What real amount will you be able to spend each year?
A) $61,334.36
B) $79,644.58
C) $79,211.09
D) $61,931.78

Question

Quizplus · Accepted Answer

Real rate = (1.0619 / 1.025) − 1 = 0.036$1,000,000 = PMT {(1 / 0.036) − [1 / 0.036(1.036)²⁵]}PMT = $61,334.36

On the Day You Retire You Have $1,000,000 Saved