You have received a trust fund currently worth 900000 Howeve

You have received a trust fund currently worth $900,000. However, you cannot access to the fund until you turn 60 years old, which is in 20 years. At that time you will be able to withdraw $10,000 per month. If the trust fund is invested at a 7 percent rate, compounded monthly, how many months will the money last once you start making the monthly withdrawals? **Answer and show work in Excel

Solution

Interest Rate = 7% Per Annum

monthly Interest rate = (1+7%)^(1/12)-1
                               = 0.565%

Thus we can calculate now the final amount = $900,000 ((1+0.565%)^(240))
                                                                = $3,479,272.264

Thus if monthly withdrawal = $10,000, the fund will last for 346 months = 28 Years and 10 Months.

This is considering the fact that money does not grow after Final amount is reached at 60,