Question

Asked Sep 29, 2019

If you have $375,000 saved for retirement, how many years will it last if you earn an annual interest rate of 9% and withdraw $30,000 at the end of each year?

Step 1

Perpetuity can be defined as the series of fixed cashflow in equal interval for an indefinite period.

It is given that,

Present value of saving is $375,000.

Annual cashflow is $30,000.

Interest rate is 9%.

Step 2

The formula to calculate the interest earned over the year is given below:

Step 3

The interest amount earned by the individual is higher than the withdrawal amount. This means that the principle amount at the start of next year will be higher ...

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