If you have $375 000 in an account earning 9% annually, what constant amount could you withdraw each year and have nothing remaining at the end of 20 years?

Question

Quizplus · Accepted Answer

This is a problem that involves the concept of an annuity, where a fixed amount is withdrawn annually from an investment that earns a certain percentage of interest per year. The formula to calculate the annual withdrawal amount that can be made from an investment over a certain period of years, so that the investment is depleted exactly at the end of that period, is based on the present value of an annuity formula. Using financial calculators or spreadsheet software simplifies this calculation, and for this scenario, with a 9% annual interest rate, $375,000 initial investment, over 20 years, the correct withdrawal amount is approximately $41,080 annually.

If You Have $375 000 in an Account Earning 9