Question

# You want to be able to withdraw \$40,000 each year for 30 years. Your account earns...

You want to be able to withdraw \$40,000 each year for 30 years. Your account earns 7% interest.

a) How much do you need in your account at the beginning?

\$

b) How much total money will you pull out of the account?

\$

c) How much of that money is interest?

\$

a ) Calculation of the amount in your account :-

Here 40,000 each year for 30 years.

So, we find the present value.

Present value = Payment receive * PVAF(7%,30 years)

present value = 40,000 * [ 1 - 1/(1.07)30] / 0.07

= 40,000 [ 1 - 0.131367] / 0.07

= 40,000 * 12.40904

Present value = \$ 496,361.64734

Amount need in your account at beginning = \$ 496,361.65

b ) Total amount you received :-

Total amount received = 40,000 * 30 =\$ 1,200,000

c ) Total interest received :-

Total interest = Total amount received - Amount in your account at beginning = \$ 1,200,000 - 496,361.64734 = \$ 703638.35266

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