Question
A person in retirement is depositing $900,000 in a saving account which pays 4.5% interest per year. The person plans to withdraw money from the
A person in retirement is depositing $900,000 in a saving account which pays 4.5% interest per year. The person plans to withdraw money from the account once a year. He starts by withdrawing $35,000 after the first year, and then in each subsequent year he increases the amount he withdraws according to an inflation rate of 1.5%. For example, he would withdraw $35,525 after the second year. Find the number of years that the money in the account will last assuming a constant yearly inflation rate of 1.5% using (a) Excel like showed in class and in the PowerPoint and (b) the geometric gradient economic formula. State the number of years the money will last for both parts (a) and (b) and show all your work including the Excel graph and the geometric gradient formula.
Step by Step Solution
3.50 Rating (153 Votes )
There are 3 Steps involved in it
Step: 1
a Using Excel To calculate the number of years the money in the account will last we can set up a calculation using Excel Heres how you can do it 1 Op...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started