How much money can be withdrawn monthly for 20 years from a

How much money can be withdrawn monthly for 20 years from a fund which earns a nominal 8% per year interest compounded monthly and has a present amount of $360,000 in it? effective monthly interest rate = 0.666667%

Solution

Time period is 20 years or 240 months. The nominal interest rate is 8% per year compounded monthly. The withdrawls are made every month so effective monthly rate is = (1 + 8%/12)^1 - 1 = 0.666667%

The present amount is $360,000. Find the monthly withdrawl A as

A = 360,000(A/P, 0.666667%, 240)

= 360,000*0.0083646

= $3011.25 approximately.