Suppose you inherited $715,000 and invested it at 8.25% per year.How much could you withdraw at the end of each of the next 20 years?

Question

Quizplus · Accepted Answer

We can use the formula for annuity payments:
PMT = (P * r) / (1 - (1 + r)^-n)
where: 
P = initial amount ($715,000)
r = interest rate per period (8.25% = 0.0825)
n = number of periods (20)

Plug in the values and solve for PMT:
PMT = (715,000 * 0.0825) / (1 - (1 + 0.0825)^-20) = $74,184.38

Therefore, the best choice is B, which is the amount you could withdraw at the end of each of the next 20 years.

Suppose You Inherited $715,000 and Invested It at 8