Problem 7-17

You have an IRA worth $150,000 and want to start to make equal, annual withdrawals (i.e., distributions from the account) for 25 years. You anticipate earning 6 percent on the funds. (To facilitate the calculation, assume an ordinary annuity.) Use Appendix D to answer the questions. Round your answers to the nearest dollar.

1. How much can you withdraw each year? $

2. Since you are earning 6 percent on your investments, how much of the withdrawal consumes your investments? $

3. How much will be in the account at the end of the first year? $

4. How much do you earn on your investments in the account during the second year? $

5. How much will be in the account at the end of the second year? $