You have a IRA worth $200,000 an want to start to make equal, annual withdrawals (i.e. distributionsfrom the account) for 20 years. You anticipate earning 5% on the funds. ( To faciliate the calculation, asume an annunity due.)
a. How much can you withdraw each year?
b. Since you are earning 5% on your investments, how much of the withdrawal consumes your investments?
c. How much will be in the account by the end of the first year?
d. How much do you earn on your investments in the account during the second year?
e. How much will be in the account at the end of the second yesr?
f. Do you see any similaraity between this problem and problem 16?