Question

A deposit of $10,000 is made a year from now, a second deposit of $10,000 is made at the end of the year 5, and a deposit of $3000 is made at the end of year 8. The account earns 6% interest. You want to withdraw an equal amount, X at the end of each year for the next 10 years. What is the amount of X if the goal is to empty the account?

Answer #1

Step 1) Calculate the Future value of all the three deposits at the end of year 8

Now we need to calculate the annuity payments that have a PV equal to 29946.46

We are given the following information:

Annual payment | PMT | To be calculated |

rate of interest | r | 6.00% |

number of years | n | 10 |

Present value | PV | $ 29,946.46 |

We need to solve the following equation to arrive at the
required PMT

So annual withdrawal can be of $4068.76 for the account to hold 0 balance at the end

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