1 answer

Please answer all parts with work 2. You retire at age 60 and expect to live...

Question:

Please answer all parts with work
2. You retire at age 60 and expect to live another 23 years. On the day you retire, you have $568,900 in your retirement savi
2. You retire at age 60 and expect to live another 23 years. On the day you retire, you have $568,900 in your retirement savings account. You are conservative and expect to earn 5.2% on your money during your retirement. How much can you withdraw from your retirement savings each month if you plan to die on the day you spend your last penny? i. (15 pts) Write down the discounted cash flow equation. ii. (10 pts) Solve the equation to find the monthly withdrawal amount.

Answers

Please find below answeres

Present Value of Ordinary Annuity = C *[(1-(1+i/100)^(-n))/(i/100]
C = Cash flow per period
I= interrest rate
N= number of payments
$                                                                568,900 = Cashflow * [(1-(1+5.2/1200)^(-23*12))/(5.2/1200}]
$                                                                568,900 Cashflow * [1-(1+0.004333)^(-23*12))/0.004333]
$                                                                568,900 Cashflow * [1-(1.004333)^(-23*12))/0.004333]
$                                                                568,900 Cashflow * [(1-0.303186)/0.004333]
$                                                                568,900 Cashflow * {0.696813/0.004333}
$                                                                568,900 Cashflow * 160.8374
Cashflow 568900/160.8374
Note 1 : Monthly annuity Monthly Cashflow $ 3,537.85
Because of question ask of monthly annutiy below asumptions have been used
Number of payments in years 23
Number of payments in month 23*12
Number of payments in month terms 276
Interest Rate for year 5.20%
Interest Rate for month 5.2%/12
Interest Rate for month terms 0.43%
Note 2 : Negative power
power(1.0043333,-23*12) 0.303186556
.

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