Suppose that on your 21st birthday you are given a $1,000,000 trust fund. If you can earn 4% in annual compound interest, how much money can you withdraw each year to ensure that if there is money in the account forever

annual payment = $40000

Explanation:

given data

annual compound interest = 4%

fund value = $1,000,000

to find out

annual payment

solution

we get here annual payment that is express as

annual payment = fund value * annual compound interest ... 1

put here value we get

annual payment = 4% * $1,000,000

annual payment = 0.04 * $1,000,000

annual payment = $40000