In: Finance
When Aunt Tillie kicked the bucket, Blake inherited her prized Avon bottle collection valued at $55,000. Frank recently sold the collection for cold, hard cash and invested the funds in an account earning 8% annually. He wants to take $2,500 per month out of the fund to pay his monthly mobile home/four-wheeler/cable/satellite/snuff bills. His question: How long will the money hold out? That is, how many monthly payments of $2,500 can he withdraw from this fund?
We need to find the number of months such that:
PV = 55,000
PMT = -2,500
I/Y = 8%/12 = 0.6666666667
FV = 0
CPT N
N = 23.8699692 months
The money will hold out for 23.8699692 months