Question

# Thomas Monroe is going to take out a withdrawal of \$80,000 per year at t =...

Thomas Monroe is going to take out a withdrawal of \$80,000 per year at t = 0 through t=5. Then he is going to make 50 annual unequal withdrawals from his savings with the first withdrawal occurring at t=6 and the last withdrawal occurring at t=55. He wants each withdrawal to have the same purchasing power as \$150,000 has today so the withdrawals need to grow at a constant rate of 3% to compensate for expected inflation per year. His account earns 10% per year. How much needs to be in his account today for him to be able to withdraw \$80,000 per year at t=0 through t=5 and make 50 additional withdrawals (from t=6 through t=55)?

0               1                2               3               4               5               6               54                55

|                 |                 |                |                 |                |                |                 |                   |

-80K        -80K          -80K         -80K         -80K         -80K          W1            W49              W50

a.   \$1,912,673

b.   \$1,781,925

c.   \$1,629,682

d.   \$1,821,701

e.   None of the above is within \$100 of the correct answer.

Thank you

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