Question

You are planning to save for retirement over the next 15 years. To do this, you will invest $1,100 a month in a stock account and $500 a month in a bond account. The return on the stock account is expected to be 7%, and the bond account will pay 4%. When you retire, you will combine your money into an account with a 5% return. How much can you withdraw each month during the retirement assuming a 20-year withdrawal period?
A. $2,636.19
B. $2,904.11
C. $3,008.21
D. $3,037.36
E. $3,406.97
When I'm trying to solve, I end up with $3,113.04 and cannot figure out where I'm wrong. Can anyone help?

Answer 1

You are using the percentages as APR. They are in EAR currently, convert them and you should get the right answer.