Question

You want to be able to withdraw $25,000 each year for 20 years. Your account earns 5% interest.

a. How much do you need in your account at the beginning? Do not include units!
b. How much total money will you pull out of the account? Do not include units!
C. How much of that money is interest? Do not include units!​

Answer 1

a. $311,555.26

b. $500,000

c. $188,444.74

Explanation:

The computation is shown below:

a. Here we have to determine the present value

Given that

PMT = $25,000

NPER = 20

RATE = 5%

FV = $0

The formula is shown below:

= -PV(RATE;NPER;PMT;FV;TYPE)

after applying the above formula, the amount that need in the beginning is $311,555.26

b. The total money should be

= $25,000 × 20 years

= $500,000

c. The amount of interest is

= $500,000 - $311,555.26

= $188,444.74