Question

A rich singer has donated $450,846 to endow a university professorial chair in Bohemian Studies. If the money is invested at 12.65%, how much can be withdrawn each year, ad infinitum (indefinitely), to pay the Professor of B.S.

Answer 1

Annual withdrawal= $57,032.02

Step-by-step explanation:

Giving the following information:

Initial investment (PV)= $450,846

Interest rate (i)= 12.65%

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

PV= Cf / i

Cf= annual cash flow

450,846= Cf / 0.1265

450,846*0.1265 = Cf

Cf= $57,032.02