Answer:
The answer is: $9,625
Explanation:
To calculate this, first we must calculate the future value on the amount invested for 10 years which yields an interest of 6.5% per year.
FV= P + (P × R × T )
where:
FV = Future value
P = Principal = $700,000
R = Interest rate in decimal = 6.5% = 0.065
T = Time = 10 years
Note also that ( P × R × T ) is the formula for simple interest on the invested amount.
∴ FV = 700,000 + ( 700,000 × 0.065 × 10 )
FV = 700,000 + 455,000 = $1,155,000
Next we are told that a withdrawal is made each month, for 10 years, hence to find how much is withdraw each month, let us calculate how many months are in 10 years:
1 year = 12 months
∴ 10 years = 12 × 10 = 120 months
Finally the withdrawal per month is calculated as follows:
Withdrawal per month = Total amount ÷ number of months
= 1,155,000 ÷ 120 = $9,625.
