You are planning to save for retirement over the next 30 years. To do this, you will invest $700...

Question:

You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $300 a month in a bond account. The return of the stock account is expected to be 11%, and the bond account will pay 7%. When you retire (at the end of the 30 years), you will combine your money into an account with a 9% return (compounded monthly). How much can you withdraw each month from your account assuming a 25-year withdrawal period?

FV of Annuity:

This is the total amount including interest collected on the maturity of the investment period. When a fixed amount is saved and deposited each month, it is called a monthly annuity. Deposits made at the beginning of each month become annuity due.

Answer and Explanation: 1

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Monthly withdrawals of $19,546.19 can be made for 25 years after retirement.

The future value of investment made in stocks would be calculated using...

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How to Calculate the Present Value of an Annuity

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Chapter 8 / Lesson 3
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Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.


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