Your 75-Year-Old Grandmother Expects to Live for Another 15 Years

question 157

Multiple Choice

Your 75-year-old grandmother expects to live for another 15 years.She currently has $1, 000, 000 of savings, which is invested to earn a guaranteed 5% rate of return.If inflation averages 2% per year, how much can she withdraw (to the nearest dollar) at the beginning of each year and keep the withdrawals constant in real terms, i.e., growing at the same rate as inflation and thus enabling her to maintain a constant standard of living?

• A) $65, 632
• B) $72, 925
• C) $81, 027
• D) $89, 130
• E) $98, 043

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Definitions:

Commitment

The state or quality of being dedicated to a cause, activity, or goal, often demonstrated through persistence and effort.

Screen a Position

The act of reviewing or evaluating a stance or viewpoint critically before further consideration.

Resistance Point

The threshold or limit beyond which a person is unwilling to go in a negotiation or discussion.

Information Sources

Refer to the origin or provider of data and facts used for making decisions or understanding contexts.