James received a $10000 bonus from his employer.
Rather than spend it all at once,he decided to deposit it into a bank account that pays 12% interest p.a. compounded monthly.
He will make equal monthly withdrawals for 2 years. After the last withdrawal the account will be empty. How much will he withdraw each month?
Steps Shown Below:
On my calculator it is as follow:
Interest – compounded monthyl, so Interest is 1 (12%/12 months)
N = number of periods 2 years times 12 months for compunded monthly, so N=24
Present Value is 10000
Future Value is zero
Solve for PMT, which is 470.72
Or
470.72.
input the following formula into excel:
=PMT(0.01,24,-10000)
or into a financial calculator:
PV=10,000
n=24
i=1%
Compute: PMT