SOLUTION: Scarlett has $700,000 saved for retirement in an account earning 3.95% interest, compounded weekly. How much will she be able to withdraw each week if she wants to take withdrawals

Question 1209862: Scarlett has $700,000 saved for retirement in an account earning 3.95% interest, compounded weekly. How much will she be able to withdraw each week if she wants to take withdrawals for 23 years? Round your answer to the nearest dollar.

Answer by CPhill(1959) (Show Source): You can put this solution on YOUR website!
Here's how to calculate the weekly withdrawal amount:
**1. Convert Annual Interest Rate to Weekly Rate:**
* Annual interest rate: 3.95% = 0.0395
* Weekly interest rate: 0.0395 / 52 weeks ≈ 0.00076
**2. Calculate the Total Number of Withdrawals:**
* Withdrawal period: 23 years
* Total withdrawals: 23 years * 52 weeks/year = 1196 weeks
**3. Use the Present Value of an Ordinary Annuity Formula:**
* This formula helps determine the regular withdrawal amount from a present lump sum, considering compound interest.
* The formula is: PMT = PV \* \[r(1 + r)^n] / \[(1 + r)^n - 1]
* PMT = Payment (weekly withdrawal)
* PV = Present Value ($700,000)
* r = Weekly interest rate (0.00076)
* n = Number of withdrawals (1196)
**4. Plug in the Values and Calculate:**
* PMT = $700,000 \* \[0.00076(1 + 0.00076)^1196] / \[(1 + 0.00076)^1196 - 1]
* PMT ≈ $891
**Answer:** Scarlett will be able to withdraw approximately $891 each week.

RELATED QUESTIONS
Uncle Moneybags has $500,000 saved for retirement. He has an account earning 6% interest. (answered by CPhill)

Uncle Moneybags has $500,000 saved for retirement. He has an account earning 8% interest. (answered by ankor@dixie-net.com,ikleyn)

Mary has $3,500 in a savings account earning 412% annual interest that is compounded... (answered by Fombitz)

Suppose you want to have $700,000 for retirement in 25 years. Your account earns 7%... (answered by ikleyn)

Jennifer is the owner of a video game and entertainment software retail store. She is... (answered by Theo)

How much must be placed each month into a retirement account earning 7% compounded... (answered by ikleyn)

A newscaster earns $26,100 and wants to invest 10% of his/her monthly salary to save for... (answered by MathLover1)

Suppose you want to have $400,000 for retirement in 20 years. Your account earns 5%... (answered by Boreal)

How much must be placed each month into a retirement account earning 9% compounded... (answered by ikleyn)