Question

A widow currently has a $94,000 investment that yields 6 percent annually. Can she withdraw $14,000 for the next ten years? Use Appendix D to answer the question. Round your answer to the nearest dollar. The maximum amount that can be withdrawn is $ so she can or canot ?withdraw $14,000 for the next ten years. Would your answer be different if the yield were 9 percent? Use Appendix D to answer the question. Round your answer to the nearest dollar. If the yield is 9 percent the maximum amount that can be withdrawn is $ so she can or cannot withdraw $14,000 for the next ten years.

Answer 1

When the rate of interest is 6%
Investment in the beginning of Year-0				94000
FVF at 6% for 10 years				1.790848
Investment worth after 10 yrs				168339.7
Annual Amount required for 10 years				14000
Annuity FVF at 6% fr 10yrs				13.18079
Future value of Amount withdrawn in 10yrs				184531.1
Hence, the amount of $ 14000 cannot be wothdrawn
Amount that can be withdrawn in 10 yrs = 168339.7 /13.18079 = 12772
When the rate of interest is 9%
Investment in the beginning of Year-0				94000
FVF at 6% for 10 years				2.367364
Investment worth after 10 yrs				222532.2
Annual Amount required for 10 years				14000
Annuity FVF at 6% fr 10yrs				15.19293
Future value of Amount withdrawn in 10yrs				212701
Hence, the amount of $ 14000 can be wothdrawn
Amount that can be withdrawn in 10 yrs = 222532.2/15.19293 = 14647