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You have just inherited $150,261 from a trust that has matured. You would like to invest the total amount into an account that pays you an annual compounded interest rate of 9. 1%, and you would like to make annual withdrawals over the next 20 years such that by the end of this 20 year period, the amount remaining in the account will be zero dollars. Determine, from the given information, the amount of the annual withdrawals. Round to the nearest cent. A. $16,578. 03 c. $15,978. 10 b. $162,851. 31 d. $15,575. 98.

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Answer:

C

Step-by-step

The amount of the annual withdrawals will be $16,574.24.

The given data in the problem is;

P = annual payment

PV= present value = $150,261

r= rate of intreast = 9.1% =9.1/100= 0.091

n = time period= 20

What is the formula for the annual payment ?

[tex]P=\frac{r\times PV}{1-(1+r)^{-n}}[/tex]

[tex]P=\frac{0.091\times 150261}{1-(1+0.091)^{-20}}[/tex]

[tex]P=16754.24[/tex]

Therefore, the amount of the annual withdrawals will be $16,574.24.

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