Question

odi is retiring at the age of 65. When she retires, she estimates that she will need a monthly income for 25 years. If Jodi starts with $328,133.32 in an account that pays 6.2% interest compounded monthly, approximately what monthly income will she be able to draw?




a.
$2,665
b.
$2,154
c.
$1,948
d.
$1,094

Answer 1

Use the annuity-immediate formula
PMT = PV * i / (1 - (1 + i)^(-n)),
with i = 0.062/12 = 0.0051666667 and n = 25*12 = 300.

PMT = 328,133.32 * 0.0051666667 / (1 - (1.0051666667)^(-300)) ≈ 2,154.47

So about $2,154 per month — answer (b).