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

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

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  1. 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

    So

    Future 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 $750,000

    The amount I can withdraw = FV less The amount invested

    The amount I can withdraw = $817,500 – $750,000 = $67,500

    So the amount that I will earn and I can withdraw annualy is $67,500.

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