Question

In: Finance

You want to be able to withdraw $45000 each year for 15 years. Your account earns...

You want to be able to withdraw $45000 each year for 15 years. Your account earns 4% interest. How much do you need in your account at the beginning?

Solutions

Expert Solution

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
= $45000[ 1-(1+0.04)^-15 /0.04]
= $45000[ 1-(1.04)^-15 /0.04]
= $45000[ (0.4447) ] /0.04
= $5,00,327.43

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