Question
In: Finance
Trying to solve a problemWithdrawals per year =$50,000Number of years -25Amount required at...
Trying to solve a problem
Withdrawals per year =$50,000
Number of years -25
Amount required at the end of 20 years will be equal to the present value of all future withdrawls.
i.e. Amount = $50,000*PVAF(11%,25years)
= $50,000*8.422
= 421,100
Where or how do they get to 8.422. To multiply by the $50,000 I just can't figure that out?
Solutions
Expert Solution
The figure of 8.422 is present value annuity factor of 11% of 25 years which is computed as follows:
= [ (1 – 1 / (1 + r)n) / r ]
= [ (1 - 1 / (1 + 0.11)25 ) / 0.11 ]
= (1 - 0.073608087) / 0.11
= 0.926391913 / 0.11
= 8.422 Approximately (Rounded to 3 decimal places)
jeff jeffy answered 3 years agoRelated Solutions
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