Question

Suppose that for retirement purposes, over the course of 27 years, you make monthly deposits of $470.00$470.00 into an ordinary annuity that pays an annual interest rate of 5.393%5.393% compounded monthly. After those 27 years, you then want to make monthly withdrawals for 28 years, reducing the balance in the account to zero dollars.

a) Find the amount of money you have accumulated in the annuity over the first 27 years:

b) How much should you withdrawing monthly from your account so that the balance reaches zero dollars after the final 28 years?

Answer 1

find the future value first

PMT=470

t=27 years

r=5.393% = 0.05393

n=12 for monthly compound

........................(1)

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.

.

.

now our present value is

PV=342528

PMT=monthly withdrawals =?

t=28 years

r=5.393% = 0.05393

n=12 for monthly compound

....................monthly withdrawals for 28 years,