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20 votes
20 votes
Miguel already knows that he will have $550,000 when he retires. If he sets up a payout annuity for 22 years in an account paying 4% interest, how much could the annuity provide each month? Round your answer to the nearest dollar.

User John Gaby
by
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1 Answer

4 votes
4 votes

Answer:

Monthly withdraw= $3,124.19

Explanation:

Giving the following information:

Present Value (PV)= $550,000

Number of periods (n)= 22*12= 264 months

Interest rate (i)= 0.04/12= 0.0033

To calculate the monthly withdrawal, we need to use the following formula:

Monthly withdraw= (PV*i) / [1 - (1+i)^(-n)]

Monthly withdraw= (550,000*0.0033) / [1 - (1.0033^-264)]

Monthly withdraw= $3,124.19

User John Rice
by
2.6k points
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