You have accumulated $1,200,000 for your retirement.How much money can you withdraw in equal annual beginning-of-the-year cash flows if you invest the money at a rate of 5% for thirty years?
A)$74,344.50
B)$60,251.52
C)$58,469.12
D)$39,061.96

Question

Quizplus · Accepted Answer

Using the formula for present value of an annuity:
PV = PMT * [(1 - (1 + r)^-n)/r]
where PV = present value, PMT = payment, r = interest rate per period, n = number of periods
we can solve for PMT:
PMT = PV / [(1 - (1 + r)^-n)/r]
Plugging in the given values:
PV = $1,200,000
r = 0.05 (5%)
n = 30
PMT = $74,344.50 (rounded to the nearest cent)
Therefore, the answer is A.

You Have Accumulated $1,200,000 for Your Retirement