Annual Interest Compounded Semiannually / Equal Annual Withdraw Question

[coolbarbara85]

If I deposit $25,000 into a savings account that pays 8% annual interest compounded semiannually… what is the maximum amount that I can withdraw at the end of each year so that I have equal annual withdrawals continuing as long as possible?

Thanks!

 

[Ishuda]

If I deposit $25,000 into a savings account that pays 8% annual interest compounded semiannually… what is the maximum amount that I can withdraw at the end of each year so that I have equal annual withdrawals continuing as long as possible?

Thanks!

As a hint, without the word 'maximum' there are many solutions. I could withdraw 1% or 2% or ... forever. However, with that word maximum in there, there is an upper limit because if I withdraw more than that I will eventually run out of money.

 

[Ishuda]

Sorry Cool, but that makes no sense.

Max: 27,040 after 1 year

As long as possible: infinity...like .01 annually

Well, actually 'twer me I would only withdraw $1061 that first year, account for a 4% inflation rate so I could draw out more each year, only plan for a total 100 withdrawals and make that last one over $51K to zero the account.

 

[Steven G]

If I deposit $25,000 into a savings account that pays 8% annual interest compounded semiannually… what is the maximum amount that I can withdraw at the end of each year so that I have equal annual withdrawals continuing as long as possible?

Thanks!

The APR for 8% compounded semiannually is 8.16%. I think that I am missing something based on other answers. I would think that you could withdraw the yearly interest forever. That amount would be 8.16%*$25,000 = $2040

 

[Ishuda]

The APR for 8% compounded semiannually is 8.16%. I think that I am missing something based on other answers. I would think that you could withdraw the yearly interest forever. That amount would be 8.16%*$25,000 = $2040

Yeah and if you added as little as a penny to that you would run out of money in about 157 years.

 

[Steven G]

Yeah and if you added as little as a penny to that you would run out of money in about 157 years.

Funny, as that is how much longer I plan to live. Besides, I thought that we think in theory and not in practice. Might you be an applied mathematician?

 

[Ishuda]

Funny, as that is how much longer I plan to live. Besides, I thought that we think in theory and not in practice. Might you be an applied mathematician?

Me, a mathematician? Well, I must admit that I have been called that on occasion but I certainly don't make that claim.

 

[Steven G]

Good catch Jomo!!
Never thought of that...
You are hereby promoted from the mail room to the file room :twisted:

Do I get a raise? I really need the money. This math thing does not pay well.

 

[jonah2.0]

WARNING: Beer soaked rambling/opinion/observation/reckoning ahead. Read at your own risk. Would be readers can take it seriously or take it with a grain of salt. In no event shall the wandering math knight-errant Sir jonah in his inebriated state (usually in his dead tired but mentally revived inebriated state) be liable to anyone for special, collateral, incidental, or consequential damages in connection with or arising out of the use of his "enhanced" beer (and tequila/absinthe) powered views.

The APR for 8% compounded semiannually is 8.16%. I think that I am missing something based on other answers. I would think that you could withdraw the yearly interest forever. That amount would be 8.16%*$25,000 = $2040

Good catch Jomo!!
Never thought of that...
You are hereby promoted from the mail room to the file room :twisted:

You're seriously saying you didn't see that coming a mile away Sir D?
You either switched to decaf this morning or you're still tired from your jousts with Sir lookagain in that other galaxy?

The APR for 8% compounded semiannually is 8.16%. I think that I am missing something based on other answers. I would think that you could withdraw the yearly interest forever. That amount would be 8.16%*$25,000 = $2040

I'm sure Sir lookagain has another unheard of arithmetic rule for that operation. Can hardly wait.
Love that fellow.