SOLUTION: You want to be able to withdraw $40,000 each year for 25 years. Your account earns 8% interest. How much do you need in your account at the beginning?
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Question 1153017: You want to be able to withdraw $40,000 each year for 25 years. Your account earns 8% interest. How much do you need in your account at the beginning? Answer by ikleyn(52847) (Show Source):
I will assume that withdrawing is made at the beginning of each year and that the compounding is made annually
at the end of each year.
By the way, these details are IMPORTANT and should go as a part of the problem formulation.
The general formula in this case is X = .
Here W = $40000 is the amount to withdraw at the beginning of each year; r = 0.08 is the annual interest rate,
p = 1 + 0.08 = 1.08; n is the number of payment periods (number of years, which is 25 in this case),
X is the starting amount at the account (the value under the question).
So
X = = 461,150.33 dollars. ANSWERANSWER. To provide you goal, you need to have $461,150.33 at the beginning at your account.
Solved.
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