Question

You are planning to save for retirement over the next 30 years. To do this, you will invest £540 a month in a share account and £540 a month in a bond account. The return of the share account is expected to be 7.4 per cent per year, and the bond account will pay 4.4 per cent per year. When you retire, you will combine your money into an account with a 6.4 per cent return per year. All rates are effective annual percentage rates (EARs).

How much can you withdraw each month from your account assuming a 25-year withdrawal period (your retirement)? (Do not include the pound sign (£). Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Answer 1

Based on the given data, pls find below steps, workings and answer:

Answer: 583.49 can be withdraw each month from your account assuming a 25-year withdrawal period

Step 1 is to consider the Future Value of the investments in Share Account and Bond Account separately;

As a step 2, These both Future Values are pooled in to a separate account with a different rate of interest, and further the monthy payments are computed