Question

Suppose you inherited $300,000 and invested it at 10% per year. How much could you withdraw at the end of each of the next 20 years (assuming you withdraw the same amount of money at the end of each year and there is nothing left after 20 years)?

Answer 1

Present value = Amount withdrawn * PVA10%,20

300000 = Amount withdrawn * 8.51356

Amount withdrawn = 300000/ 8.51356

                       = $ 35237.90   (rounded to 35238)

#Find present value annuity factor from present value annuity table( ordinary annuity) at 10% for 20 periods

or using financial calculator where i=10%,n= 20 and PMT =1