Question

Section 13.2

10. Sarah Ling has saved $85 000. If she decides to withdraw $3000 at the beginning of every three months and interest is 6.125% compounded annually, for how long can she make withdrawals?  

Answer 1

N = ?   FV = 85000   PMT = 3000    I = 0.06125   c = 1  p =(1+0.0625)^1-1 = 0.0625 85000 = 3000(1.0625^n -1)/0.0625)(1+0.0625)85000 = 3187.5/0.0625(1.0625^n – 1) 85000 = 51000 (1.0625^n – 1)1.66666667 = 1.0625^n – 11.0625^n = 2.6666666667N ln1.0625 = ln2.6666667N(0.06062462181 = 0.9808295313N =  0.9808295313 / 0.06062462181 N = 16.1787278003

Therefore, she can make withdrawals for  16 years