Question 1139157: An inheritance of R400 000 will provide how much at the end of each year for the next 20 years, if money is worth 7% p.a., compounded annually?
Found 2 solutions by ikleyn, MathTherapy:
Answer by ikleyn(52834)   (Show Source):
You can put this solution on YOUR website! .
The usual (the regular, the traditional) formulation of such problems considers withdrawing money
at the BEGINNING of each year (with the compounding still at the end of each year).
It is also coherent (consistent) with the common sense: you need money at the beginning of each year to spend them
during the year - not at the end of the year.
So, I will edit your formulation in this way
An inheritance of R400 000 will provide how much at the  beginning of each year for the next 20 years,
if money is worth 7% p.a., compounded annually?
Solution to the edited problem
For this problem, the general formula is
W =  .
where W is the withdrawing annual rate, A is the initial amount at the account,
r is the annual compounding percentage rate, expressed as a decimal, and p = (1+r).
In this case, the initial amount is 400000, the annual compounding rate is r = 0.07,
p = 1 + r = 1 + 0.07, the number of withdrawing periods is n = 20
(same as the number of years). So
W =  = 35287.08. ANSWER
ANSWER. Inheritance of R 400000 will provide R 35287.08 annually under given conditions.
Solved.
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See 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
in this site, and especially lesson marked (*) in the list as the most relevant to the given problem.
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The difference with the answer by @MathTherapy is due to the fact that his calculation supposes that
the amount withdraws at the end of each year, while my solution assumes that the amount withdraws at the beginning of each year.
Answer by MathTherapy(10555)  (Show Source):
You can put this solution on YOUR website!
An inheritance of R400 000 will provide how much at the end of each year for the next 20 years, if money is worth 7% p.a., compounded annually?
This was presented a LONG while back, and was correctly answered, and is again placed below.
BEWARE: Do not EVEN LOOK at ADDINGUP's answer, because as usual, ABSOLUTELY NOTHING he seems to post here ever ADDS UP.
Question 1073455: An inheritance of �400000 will provide how much at the end of each year for the next 20 years , if money is worth 7% compounded annually
Correct answer: 
In this case, only the currency changes to: 
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