an engineer received a bouns of $10000 if he deposits it now at an interest rate...
an engineer received a bouns of $10000 if he deposits it now at an interest rate of 8% per year how many years must the money be accumulated befor shw can withdraw %2000 per year forever?
Homework Answers
The number of years is calculated using the present value of deferred perpetuity equation
where K is the number of years money must be accumulated before withdrawing.
In the above equation solving for the value of K
Taking natural log on both sides of the equation
K ln 1.08 = ln 2.5
K = ( ln 2.5 
ln 1.08)
K = 11.9 years
K 
12 years
Thus the money must accumulate for 12 years before the engineer can withdraw $ 2000 per year forever.
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