Question

11. Your neighbor has just won a bonus prize of $ 1,000,000 at 6/49. He deposits this amount in a bank account earning him 6.75% per year, compounded monthly (every month). He wants to start withdrawing money every month for 25 years in a month. How much will he withdraw each month?

Answer 1

	Annuity payment=	P/ [ [1- (1+r)-n ]/r ]
P=	Investment	1,000,000.00
r=	Rate of interest per period
	Rate of interest per annum	6.75%
	Payments per year	12.00
	Rate of interest per period	0.563%
n=	number of payments:
	Number of years	25
	Payments per year	12.00
	number of payments	300
	Annuity payment=	1000000/ [ (1- (1+0.00563)^-300)/0.005625 ]
	Annuity payment=	6,909.12

Answer is:

6,909.12

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