Answer to Question #100534 in Financial Math for Terrence Garcia

Question

Mr. Deneau accumulated ​$105, 000 in an RRSP. He converted the RRSP into a RRIF and started to withdraw ​$1000 at the end of every month from the fund. If interest is 5.1​% compounded semi-annually​, for how long can Mr. Deneau make​ withdrawals? State your answer in years and months​ (from 0 to 11​ months).

Answer 1

FV = 105000

PMT = 1000

c = 12

I = 0.051/2=0.0255

P = ((1+0.0255)-¹²) – 1

P = -0.260782868

P = -0.0166869211

N = ln[105000(-0.260782868)/1000 +1] / ln (1+(-0. 260782868))

N = 10.953978

Therefore, he can make withdrawals for 10 years and 11 months.