Farida has saved $600,000 in her retirement account, which earns an annual interest rate of 3% She plans to withdraw from the account each month for 25 years. Approximately how much will Farida receive monthly? Use the formula P=PV⋅(r)/(1−(1+r)^−n)
Answer
A
2 dollars comma 845 point 2 7
B
1 dollars comma 018 point 4 6
C
2 dollars comma 650 point 0 0
D
1 dollars comma 500 point 2 1
Explanation
Use a monthly interest rate of 0.03 ÷ 12 = 0.0025 and 25 × 12 = 300 monthly withdrawals. Substituting into the formula gives P = 600,000(0.0025) ÷ [1 − (1.0025)^−300] ≈ $2,845.27 per month. This matches choice A, $2,845.27.
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