Question

By the time you retire exactly at age 70 you will have saved $700,000 into your diversified portfolio of mutual funds, bonds, and T-bills. You expect to move onto the Spirit world at exactly age 80. You do not want to have any money left over when you die. How much can you withdraw at the beginning of each month for 10 years of retirement if your annual rate of return is 6.5%? (See WB Ch. 10 Example 10.5)

Answer 1

C $ 7,905.537

Step-by-step explanation:

We need to solve for the monthly installment of a 10 years annuity-due of 700,000 . it is due as the payments are at the beginning of each month.

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

PV 700,000.00

time 120 (10 years x 12 month per year)

rate 0.005416667 (0.065 annual / 12 months)

`700000 / (1-(1+0.00541667)^(-120) )/(0.00541667)(1+0.00541667) = C\\`

C $ 7,905.537