Question

If 25,000 is invested into an account paying 4.5% per year, compounded quarterly, how much money can be withdrawn from the account every two month for the next 6 years

Answer 1

Amount Invested in Account = $25000

Calculating the APR for 2-monthly from 4.5% compounded quarterly:-

where, r = interest rate compounded quarterly = 4.5%

m = No of times compounding = 4

APR = interest rate compounded every 2 months

n = no of times compounding =6

Taking 6-root on both sides,

1.00748599 = (1+APR/6)

APR = 4.4916%

Now calculating the withdrawal every 2-month:-

Where, C= Periodic withdrwal

r = Periodic Interest rate = 4.4916%/6 = 0.7486%

n= no of periods = 6 years*6 = 36

Present value = $25000

C = $794.80

So, withdrawal from account every 2 montsh is $794.80

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