Question

Mr. Rahul has been saving Rs.9,500 at the beginning of every quarter for 25 years at an

average return of 14% p.a. compounded quarterly. He has to set apart Rs.15,00,000 for

his daughter’s marriage and Rs.10,00,000 for his son’s marriage from accumulated sum

after 25 years. He is saving separately for their education and he wishes to withdraw a

certain amount for the next 25 years on the remaining sum. The money accumulated will

be invested at a rate of 8% p.a. How much can he withdraw at the beginning of every

year?

Answer 1

Sum of saving after 25 years:

$9.500*\frac{(1+\frac{0.14}{4})*((1+\frac{0.14}{4})^{25*4}-1)}{(1+\frac{0.14}{4})-1}=8,481,629.11$

He needs:

$15,000,000+10,000,000-8,481,629.11=16,518,370.89$

He needs to withdraw ever year:

$16,518,370.89=P*\frac{1.08*(1.08^{25}-1)}{0.08}$

$P=209,214.02$