Chen is 65 years old and about to retire. She has ​$790 comma 000 saved to supplement his pension and Social Security and would like to withdraw it in equal annual dollar amounts so that nothing is left after 16 years. How much does she have to withdraw each year if she earns 5 percent on her​ money?
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Part 1
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If Chen earns 5 percent on her​ money, the amount she will have to withdraw each year is ​$

enter your response here.  ​(Round to the nearest​ cent.)

To calculate how much Chen needs to withdraw each year, we can use the **Present Value of an Annuity** formula. The formula is as follows:

\[
PV = PMT \times \left( \frac{1 - (1 + r)^{-n}}{r} \right)
\]

Where:
- $ PV $ is the present value of the annuity (in this case, $790,000).
- $ PMT $ is the annual withdrawal (what we're solving for).
- $ r $ is the annual interest rate (5% or 0.05).
- $ n $ is the number of years (16 years).

We need to rearrange this formula to solve for $ PMT $ (the annual withdrawal):

\[
PMT = \frac{PV}{\frac{1 - (1 + r)^{-n}}{r}}
\]

Substituting the values into the formula:

\[
PMT = \frac{790,000}{\frac{1 - (1 + 0.05)^{-16}}{0.05}}
\]

Let’s calculate this.Chen would need to withdraw approximately **$72,893.23** each year if she earns 5% on her money, in order for the funds to last 16 years.

Would you like any further details or explanations on this? Here are some additional related questions you might find helpful:

1. What happens if the interest rate changes?
2. How would the annual withdrawal change if the time period were extended?
3. How is the Present Value of an Annuity calculated in different financial situations?
4. Can this formula be used to calculate monthly withdrawals instead of annual?
5. What factors affect retirement withdrawal strategies?

**Tip:** Consider inflation when planning for long-term financial withdrawals to maintain your purchasing power over time.

Chen is 65 years old and about to retire. She has $790,000 saved to supplement her pension and Social Security and would like to withdraw it in equal annual dollar amounts so that nothing is left after 16 years. How much does she have to withdraw each year if she earns 5 percent on her money?

Find out how to calculate equal annual withdrawals from a $790,000 retirement fund over 16 years with a 5% interest rate. This problem demonstrates the Present Value of an Annuity formula to help determine the necessary withdrawal amount.

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