Suppose you inherited $575,000 and invested it at 8.25% per year.How much could you withdraw at the end of each of the next 20 years?
A) $48,323.60
B) $59,658.76
C) $69,800.75
D) $61,448.53
E) $56,079.24

Question

Quizplus · Accepted Answer

To determine the annual withdrawal amount, we can use the formula for present value of an annuity:
PV = (PMT/i) x (1 - 1/(1+i)^n)
where PV is the present value of the investment, PMT is the annual withdrawal amount, i is the interest rate per period (in this case, per year), and n is the number of periods (in this case, years).

Rearranging the formula to solve for PMT, we get:
PMT = PV x (i/(1 - 1/(1+i)^n))

Plugging in the given values, we get:
PV = $575,000
i = 8.25% per year = 0.0825 per year
n = 20 years

PMT = $575,000 x (0.0825/(1 - 1/(1+0.0825)^20)) = $59,658.76

Therefore, the annual withdrawal amount is $59,658.76, which is choice B.

Suppose You Inherited $575,000 and Invested It at 8