You are ready to retire. A glance at your 401K statement indicates that you have $750,000. If the funds remain in an account earning 9%, how much could you withdraw at the beginning of each year for the next 25 years

You are ready to retire. A glance at your 401K statement indicates that you have $750,000. If the funds remain in an account earning 9%, how much could you withdraw at the beginning of each year for the next 25 years

Answer:Using the compounding formula we can calculate the amount that I will earn by calculating the difference between the Future value of the investment and the amount invested.

Step 1 Find Future Value

FV = Present Value * (1+r)^n

SoFuture Value = $750,000 * (1+9%)^1

FV = $817,500

Step 2 Find the Difference between he Future value of the investment and the amount investment

And the amount invested is $750,000The amount I can withdraw =FVlessThe amount investedThe amount I can withdraw =$817,500 – $750,000 = $67,500So the amount that I will earn and I can withdraw annualy is $67,500.