Assume 15 million is deposited today in an account expected

Assume $1.5 million is deposited today in an account expected to earn 8% annually over a retiree\'s 30 years of life expectancy. What annual annuity can be withdrawn, beginning today?

Solution

The annuity he can withdraw is given by the \"PMT\" formula in excel as in =pmt(rate,nper,pv,fv,type) where

rate = 8% =0.08

nper = 30 years

pv = 1,500,000

Since it says begining today, we make type =1

(type = \"1\" if it is beginning period (today) anf type = \"0\" if it is ending period (after an year))

So annuity =pmt(0.08,30,1500000,0,1) = $123,371.44

annual annuity that can be withdrawn = $123,371.44