Your Uncle Has $1,015,000 and Wants to Retire

question 112

Multiple Choice

Your uncle has $1,015,000 and wants to retire.He expects to live for another 25 years,and he also expects to earn 7.5% on his invested funds.How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account?

• A) $84,703.56
• B) $82,162.46
• C) $98,256.13
• D) $105,032.42
• E) $77,080.24

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Definitions:

Diversified Portfolios

Investment strategies involving the mixing of various asset classes and securities to reduce risk through diversification.

Financial Distress

A scenario in which a business is unable to fulfill or struggles to pay its debts to those it owes money to.

Capital Budget

The process and plan for allocating resources for major investments or projects that a company undertakes to maintain or expand its operations.

Optimal Capital

The best mix of debt, equity, and other financing sources to maximize a firm’s value while minimizing its cost of capital.