SOLUTION: You want to be able to withdraw $20,000 each year for 25 years. Your account earns 10% interest. a) How much do you need in your account at the beginning? $ b) How much

Algebra ->  Finance -> SOLUTION: You want to be able to withdraw $20,000 each year for 25 years. Your account earns 10% interest. a) How much do you need in your account at the beginning? $ b) How much       Log On


   



Question 1121992: You want to be able to withdraw $20,000 each year for 25 years. Your account earns 10% interest.
a) How much do you need in your account at the beginning?
$

b) How much total money will you pull out of the account?
$

c) How much of that money is interest?
$

Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
You want to be able to withdraw $20,000 each year for 25 years. Your account earns 10% interest.
a) How much do you need in your account at the beginning?
b) How much total money will you pull out of the account?
c) How much of that money is interest?

assuming you want to withdraw 20,000 at the end of each year, the following applies.

use the following calculator.

https://arachnoid.com/finance/

your inputs will be:

present value = 0
future value = 0
interest rate percent per yearly time period = 10
number of yearly time periods = 25
payment amount each yearly time period = 20,000
payment is made at the end of each yearly time period

you click on PV and the calculator tells you that the present value is equal to -181,540.80.

your payments per time period are positive because it's money you receive.
your investment in the account at the beginning of the 25 year period is negative because it's money you pay out.

the amount that has to be invested in the account is 181,540.80.

over the 25 year period you will withdraw a total of 25 * 20,000 = 500,000.

500,000 minus 181,540.80 = 318,459.2 of that will be interest that you earned from your investment.

here's what the display of the calculator looks like.

$$$