Suppose your rich uncle gave you $50,000, which you plan to use for graduate school. you will make the investment now, you expect to earn an annual return of 6%, and you will make 4 equal annual withdrawals, beginning 1 year from today. under these conditions, how large would each withdrawal be so there would be no funds remaining in the account after the 4th withdraw?
C = $14,429.57 You can withdraw up to this amount.
we have to calculate the cuota of the annuity for present value
rate = 0.06
time = 4 years
PV 50,000 your uncle gift you.
C = $14,429.57
Making 4 withdrawals for this amount, you will earn an annual return of 6%
each withdrawal will be for : $ 11,429.58
we will calcualte the cuota of an annuity of 4 payment with a present value of 50,000 discounted at 6%
rate 6% = 6/100 = 0.06
C $ 11,429.575