Solution for Problem 9.3.1

Having just won $1,000,000 after taxes in the state lottery, how much money can you withdraw at the end of each month for 20 years if the banks pays 6% interest compounded monthly.

Solve

       Step

i = 0.06 12 = 0.005 

k = 12, r = 0.10, Monthly means 12 times a year

A is present value = 1,000,000
n = 20 years

Find the P the Payment (also called rent)

You would withdraw $7,164.31 every months for 20 years.
Enter 1,000,000 0.005 ( 1 -  1.005 xy ( -12 20 ) )    [enter or =] in your calculator
Hint: don't round until you are completely finished with your calculations.