At retirement, Maria's saving account has $620,000 in it and is earning 1.2% compounded monthly.  She decides to make equal monthly withdrawals at the end of each month for the next 20 years.   (a) What monthly withdrawal for the next 20 years will completely exhaust Maria's saving account assuming that the account continues to earn 1.2% compounded monthly? (b) How much interest will her account have earned during these 20 years?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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At retirement, Maria's saving account has $620,000 in it and is earning 1.2% compounded monthly.  She decides to make equal monthly withdrawals at the end of each month for the next 20 years.

 

(a) What monthly withdrawal for the next 20 years will completely exhaust Maria's saving account assuming that the account continues to earn 1.2% compounded monthly?

(b) How much interest will her account have earned during these 20 years?

 

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The present value is the value of the sum received at time 0 or the current period. It is the value of the sum that will be received in the future period.

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