Question

Suppose your rich uncle gave you $50,000, which you plan to use for graduate school. You will make the investment now, you expect to earn an annual return of 6%, and you will make 4 equal annual withdrawals, beginning 1 year from today. Under these conditions, how large would each withdrawal be so there would be no funds remaining in the account after the 4th withdraw?

Answer 1

C = $14,429.57 You can withdraw up to this amount.

Step-by-step explanation:

we have to calculate the cuota of the annuity for present value

`C * (1-(1+r)^(-time) )/(rate) = PV\\`

Where:

rate = 0.06

time = 4 years

PV 50,000 your uncle gift you.

`C * (1-(1+0.06)^(-4) )/(0.06) = 50,000\\`

C = $14,429.57

Making 4 withdrawals for this amount, you will earn an annual return of 6%