You decide to be in saving for your retirement days. You begin with depositing $300 per month into a savings account that is earning 12% per year compounded monthly. You may deposit faithfully for 25 years at which time you'll retire. Your institution wants to keep your money and as an incentive begins paying 15% per year compounded monthly provided your delay, taking out any money for four years. After four years, you decide to begin withdrawing equal payments for the next 20 years. What are the equal monthly payments that you can withdraw if you want the account to last for 20 years?
Use the following to answer the next two questions:
You decide to be in saving for your retirement days. You begin with depositing $300 per month into a savings account that is earning 12% per year compounded monthly. You may deposit faithfully for 25 years at which time you'll retire. Your institution wants to keep your money and as an incentive begins paying 15% per year compounded monthly provided your delay, taking out any money for four years. After four years, you decide to begin withdrawing equal payments for the next 20 years.
What are the equal monthly payments that you can withdraw if you want the account to last for 20 years?
Periodic deposits refer to the amount that is being deposited into savings funds for interest yield. The concept of the time value of money applies in this regard. The concept states that money if invested earns interest, and hence, money held today is worth more than hiding the same sum in the future due to the power of interest yield.
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