Question

•You invest $25,000 into an account which will return 9% annually (with monthly compounding). If you withdraw $200 at the beginning of each month, how long will it take before your account runs out of money?

How would I do this using a texas instruments BA II Plus calculator?

Answer 1

Information provided:

Present value= $25,000

Monthly withdrawal= $200

Monthly interest rate= 9%/12= 0.75% per month

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

This can be solved using a Texas Instruments BA II Plus financial calculator. Enter the below in the calculator in BGN mode:

PV= -25,000

PMT= 200

I/Y= 0.75

Press the CPT key and N to compute the amount of time it will take before the account runs out of money.

Press the CPT key and N to compute the time.

The value obtained is 356.8960.

Therefore, it will take 356.8960/12= 29.74 years 30 years before the account runs out of money.

In case of any query, kindly comment on the solution.