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.

The answer is A, please help show work

Thank you

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