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Maximum constant amount

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Reference no: EM131090064

In order to save for retirement, Dave make the first of 8 equal annual deposits into an investment on June 6, 2014. He believes the investment will always earn 10% a year. The last deposit will be made on June 6, 2021. The deposits must be of sufficient size to enable Dave to make 30 equal annual withdrawals of $80,000 starting on June 6, 2026.

Assume that he makes the 8 deposits and makes the first two $80,000 withdrawals in 2026 and 2027. On the evening of June 6, 2027,

Dave finds out the investment has been yielding only 5% since June 6, 2017. Expecting to still live another 28 years, he knows he must cut back on his lavish lifestyle.

Whats the maximum constant amount he can with draw for each of the remaining 28 years, starting June 6, 2028 if the interest rate continues to stay 5%?

Reference no: EM131090064

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