Question

Congratulations, you have saved well and are ready to begin your retirement. If you have $1,750,000.00 saved for your retirement and want it to last for 40 years, and will earn 10.8% compounded monthly: What is the amount of the monthly distribuion? 216.50 How much interest is earned in retirement?

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Jayne

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84 Answers

Convert Annual interest to monthly interest rate
Monthly interest rate= 10.8/12=0.9
Calculate the number of monthly payments
Total number of monthly payments= 40*12= 480
Calculate Monthly Distribution
PMT=P*r/(1-(1+r)^-n) where
p= initial savings
r= monthly interest rate
n= number of payments
PMT=1750000*0.009/(1-(1+0.009)^-480
PMT= 15600.92
Interest Earned = Total Amount Paid- Initial Savings
Total Amount Paid= PMT*Number of Payments
Total Amount Paid= 15600.92*480=7489767.51
Interest Earned = 7489767.51 - 1750000=5739767.51
Therefore,
A) Amount of monthly distribution= $15600.92
B)Interest Earned= $5739767.51

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