Question

15. You received $100,000 as a signing bonus from your first employer. You plan to use this money to buy a 20-year annuity at a rate of 12%. How much will you be able to withdraw each year starting at the end of the 1st year?

Answer 1

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate/Frequency =	12.000000
FV = Future value =	$0
N = Total payment term x Frequency =	20
PV = Present value =	-$100,000.00
CPT > PMT = Payment = Withdrawal =	$13,387.88

OR

Alternate formula-based method:	#
PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1) =
PMT = 100,000 x 12% x (1+12%)^20 / ((1+12%)^20 - 1) =	$13,387.88

answered by: anonymous