Question 1054124: You want to be able to withdraw $40,000 each year for 30 years. Your account earns 9% 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 Boreal(15235)   (Show Source):
You can put this solution on YOUR website! I'm assuming it is compounded annually at 9%.
A=P{1-(1+.09}^-30)}/.09
A is the amount needed at the start (present value or PV in some formulae)
P=40,000, the amount withdrawn each year
0.09 is the interest per compounding period
30 is the number of years.
If this were compounded twice a year, the interest rate r would be 0.045 (per compounding), and the exponent would be -60.
You do this on a calculator by 1.09^-30 and subtract that from 1.
That is about 0.92. don't round until the end.
Then divide that by 0.09 and multiply by 40000 (or the reverse, since multiplication is commutative)
A=$410946.16
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You pull out $40,000 per year *30 years, or $1,200,000
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Interest is 1200000-410946.16=$789,053.84.
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