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Suppose that you have just retired at the age of 65 with a retirement account that has the net asset value of $ 10 million
Suppose that you have just retired at the age of 65 with a retirement account that has the net asset value of $ 10 million. Assuming that you will live until the age of 100 (35 years more!), how much can you afford to withdraw from your retirement account per month? Assume that your retirement account continues to earn 8% APR (with monthly compounding) on its remaining balances. (show your work.)
Expert Solution
Computation of Monthly Withdrawal using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Monthly Withdrawal = ?
Rate = 8%/12
Nper = 35*12
PV = $10,000,000
FV = 0
Substituting the values in formula:
=pmt(8%/12,35*12,-10000000,0)
PMT or Monthly Withdrawal = $71,026.09
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