Your Uncle Has $375,000 and Wants to Retire

question 87

Multiple Choice

Your uncle has $375,000 and wants to retire.He expects to live for another 25 years and to be able to earn 7.5% on his invested funds.How much could he withdraw at the end of each of the next 25 years and end up with zero in the account?

• A)$28,843.38
• B)$30,361.46
• C)$31,959.43
• D)$33,641.50

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Definitions:

Compensating Balance

A compensating balance is a minimum balance that must be maintained in a bank account, required by some banks in order for their customers to obtain or maintain a loan.

Master Account

A central account that holds funds or securities, often used by institutions to manage multiple sub-accounts.

Available Balance

The amount of funds in a bank account that is accessible for withdrawal or processing of checks or electronic payments, not including any holds, unprocessed transactions, or restrictions.

Cheque Book

A booklet of cheques provided by a bank allowing the account holder to pay others by writing cheques.