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Homework Help: Finance problem

  1. Sep 26, 2011 #1
    1. The problem statement, all variables and given/known data

    initial amount = $450 000
    interest rate = 4.8% per month
    withdrawal = $3600 per month

    This is a question on an old test paper. It is calculator assumed.
    We use Casio classpad calculators.
    a) amount remaining after ten years?
    b)time to exhaust account?
    14.5 years
    c) total withdrawals?
    d) total interest earned??????
    This is where I am stuck. Up until now I have managed to do everything on the financial application, but here I run out of ideas....
    I also have not managed to come up with a working sequence. My guess would be:
    An+1 = An x 1.048 - 3600
    Ao = 450 000

    But that did not appear to work as everything is calculated monthly.... any help would be fantastic thanks :)
  2. jcsd
  3. Sep 26, 2011 #2
    Assuming we're talking about simple interest,

    [itex]Total~Interest = Principal \times Interest~Rate \times Time [/itex]

    Where time has to be in the same interval as the interest rate. You just need to convert your time interval from years to months. Then for a final equation, multiply the monthly withdrawal by the number of withdrawals and subtract it from the total interest.
  4. Oct 4, 2011 #3
    I would imagine that whether the withdrawal is made before or after the interest is calculated makes a big difference. Is it stated explicitly?
  5. Oct 6, 2011 #4
    initial amount = $450 000
    interest rate = 4.8% per month
    withdrawal = $3600 per month

    4.8% per month interest. Do you mean 4.8% per year? 4.8% per month adds 21.6K bucks a month to the account. I need an IRA that does that!
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