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Finance problem

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  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?
    $173462.47
    b)time to exhaust account?
    14.5 years
    c) total withdrawals?
    173
    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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