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Rachel plans to withdraw $5,000 at the end of each year from her bank account that pays 4% interest. How many annual withdrawals can she make if her starting balance is $63,296.48?

1 Answer

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I inferred 4% interest to be per annum.

Answer:

about 19 annual withdrawals

Explanation:

First, we note that Rachel plans to withdraw $5,000 at the end of each year from a starting balance is $63,296.48, excluding the 4% interests, the total withdrawals possible is

$63,296.48/$5,000 = 12.65 (in years)

Including the 4% interest;

4% x $63,296.48 = $2,531.85

To find the possible withdrawals we multiply by the initial period excluding interest rates

$2531.85 * 12 = $31,901/5,000= 6.38 (in years)

Total: 6.38 + 12.65 = 19.03 (in years)

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