Question

In: Finance

   Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants...

  

Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, starting at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account. For how many years can he make the $35,000 withdrawals and still have $25,000 left in the end?

a.

12 years

b.

16 years

c.

15 years

d.

17 years

e.

19 years

Solutions

Expert Solution

Present Value of amount Invested = $320,000

Periodic Withdrawal at the end of each year = $35,000

Future Value to left to give you when he ceases to withdraw funds = $25,000

Calculating the number of years he can make the withdrawal and still have future left using Excel "NPER" function:-

So, the number of years he can make the withdrawal and still have future left is 16.73 years

Option D. 17 years(rounding off the decimal to nearest year)

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