SOLUTION: You want to be able to withdraw $45,000 each year for 20 years. Your account earns 6% interest compounded monthly. a) How much do you need in your account at the beginning? $

Algebra ->  Expressions-with-variables -> SOLUTION: You want to be able to withdraw $45,000 each year for 20 years. Your account earns 6% interest compounded monthly. a) How much do you need in your account at the beginning? $      Log On


   

Question 1136358: You want to be able to withdraw $45,000 each year for 20 years. Your account earns 6% interest compounded monthly.
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 ikleyn(52932) About Me  (Show Source):
You can put this solution on YOUR website!
.

In such school/(college ?) Math problems, if you withdraw the fixed amount yearly, then the account is assumed to be compounded yearly.

If the account is compounded monthly, then it is assumed that the fixed sum withdraws monthly.

But this mix "withdrawing yearly and compounding monthly" does not work.

It may work if the two periods - withdrawing and compounding are the same.

If not, then the problem requires additional clarifications.


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If you want to see relevant theory and solved problems, look into my lessons in this site associated with annuity saving plans and retirement plans

    - Ordinary Annuity saving plans and geometric progressions
    - Annuity Due saving plans and geometric progressions
    - Solved problems on Ordinary Annuity saving plans
    - Withdrawing a certain amount of money periodically from a compounded saving account (*)
    - Miscellaneous problems on retirement plans

and especially lesson marked (*) in the list as the most relevant to the given problem.