Question

Victor Vogel is 27 years old and currently earns $65,000 per year. He recently picked a winning number in the Wisconsin lottery. After income taxes he took home $1,000,000. Victor put the entire amount into an account earning 5% per year, compounded annually. He wants to quit his job, maintain his current lifestyle and withdraw enough at the beginning of each year to replace his salary. At this rate, how long will the winnings last?

Got the explanation from classmates
N=??? I/Y=5 PV=1000000 PMT=-65000 FV=0
It will last 27 years.

Answer 1

27 years

Explanation:

The formula for the number of payments can be used:

N = -log(1 +0.05(1 -1000000/65000))/log(1.05) +1 = 27.03

There will be a couple thousand dollars left after the 27th payment.

The winnings will last 27 years.