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And amount of $8500 was deposited on January 1, 2016 into an account which earns 10%...

And amount of $8500 was deposited on January 1, 2016 into an account which earns 10% compounded monthly. monthly withdrawals of equal size will begin on February 1, 2016 and end on July 1, 2024. determine the size of the withdrawals
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Answer #1

PV of investment (PV) = $8500

future value of investment (PV) = $0

Interest rate (i) = 10% p.a. = 0.8333% p.m.

No of withdrawals = 102 (from February 1, 2016 to July 1, 2024 both inclusive)

Monthly withdrawals (PMT) = ??

Therefore, using financial calculator or PMT function in excel,

PMT = $124.03

Alternatively we can use annuity formula,

PV = A [1-(1/(1+i)n)] / i

8500 = A [1-(1/1.0083333102)] / (0.0083333)

8500 = A x 68.5292

Therfore A = 8500 / 68.5292 = 124.03

Thumbs up please if satisfied. Thanks :)

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