Copyright

Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw...

Question:

Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, beginning 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. What is the maximum number of $35,000 withdrawals that he can make and still have at least $25,000 left in the account?

Annuity:

An annuity will make regular payments during a specific period. Usually, investors will acquire an annuity as a part of the retirement plan due to its stability of income. In fact, an annuity will have two phases: accumulation and distribution phase. However, an investor will not necessitate an accumulation phase if an annuity is purchased by a large lump sum.

Answer and Explanation: 1

Become a Study.com member to unlock this answer!

View this answer

Summary:

  • Initial fund = $300,000
  • Annual withdrawal = $35,000
  • Lump sum = $25,000
  • Annual interest rate (I) = 7.5%


In this case, the future value of...

See full answer below.


Learn more about this topic:

Loading...
What is Annuity? - Definition & Formula

from

Chapter 2 / Lesson 7
22K

Learn about annuities. Understand what an annuity is, examine the annuity formula and learn how to calculate its future value, and see examples of annuities.


Related to this Question

Explore our homework questions and answers library