Question

Stan has made a $125.30 monthly deposit into an account that pays 1.5% interest, compounded monthly, for 35 years. He would now like to draw a monthly salary from the account. Determine the amount that Stan can withdraw each month for 20 years, if he plans on not having anything in the account at the end of the 20 year period and no future deposits are made to the account.

Answer 1

You need an accumulation phase: 125.30 / month at 1.50%/12 monthly interest for 35*12 months. Unfortunately, it's not clear if these deposits are end-of-month or beginning-of-month. You'll have to make an assumption and move forward. In the payout phase, make the beginning or ending assumption consistent with the accumulation phase.

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