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A person who is retiring at age 60 and who has $200,000 wants to leave an estate of at least $45,000. How much can the individual draw annually on the $200,000 (starting at the end of the year) if the funds earn 10 percent and the person's life expectancy is 80 years? Round your answer to the nearest cent.

 Jul 10, 2015

Best Answer 

 #1
avatar+106046 
+5

Id start by using the compound int formula to work out what 45000 in 20 years time is worth today at 10%. 

I'd then subtract that from the 200000 dollars. This will be the present value of your ordinary annuity.

now use the PV ordinary annuity formula to work out what the max yearly payment can be.

 Jul 10, 2015
 #1
avatar+106046 
+5
Best Answer

Id start by using the compound int formula to work out what 45000 in 20 years time is worth today at 10%. 

I'd then subtract that from the 200000 dollars. This will be the present value of your ordinary annuity.

now use the PV ordinary annuity formula to work out what the max yearly payment can be.

Melody Jul 10, 2015

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