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Using a 5% annual compound interest rate, what investment today is needed in order to withdraw...

Using a 5% annual compound interest rate, what investment today is needed in order to withdraw $6000 annually for 10 years if the first withdrawal occurs in year 4 year?

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Answer #1

Annual withdrawals for 10 years = $4000

Number of years to start the withdrawal = 4 years

R = 5%

Present value of the annual withdrawals = (6000*(1 - 1/1.05^10)/.05)*(1/1.05^4)

Present value of the annual withdrawals = $38116.14

So, investment done today is $38116.14 or $38116.

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