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Your grandfather is 75 years old. He has total savings of
Rs.80,000. He expects that he live for another 10 years and
will like to spend his savings by then. He places his
savings into a bank account earning 10 per cent annually.
He will draw equal amount each year- the first withdrawal
occurring one year from now in such a way that his account
balance becomes zero at the end of 10 years. How much will
be his annual withdrawal?
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Answer Posted / abhivirthi tax and industrial
The total amount deposited into bank is Rs.80000.00. If the amount is withdrawn equally for 10 years amount to be withdrawn per year will be Rs. 8000.00. If the rate of interest is 10% the bank interest fetched each year will decrease proportionately like 8000,00 for first year, 7200 for second year, 6400 for third year, 5600 for fourth year, 4800 for fifth year, 4000 for the sixth year, 3200 for the seventh year, 2400 for the eighth year, 1600 for the ninth year and 800 for the tenth year i.e. for the last year and thus the total interest works to Rs. 44000.00. By dividing the total interest of Rs. 44000 by ten years the interest per year if disbursed evenly works to Rs. 4400 and adding the saving withdrawn equally at Rs.8000.00 per year, the total amount to be withdrawn works to Rs. 12400.00 per year equally.
Reply From:
ABHIVIRTHI Tax and Industrial Consultancy
R.R.JAGADEESAN
VAT PRACTITIONER AND INDUSTRIAL CONSULTANT
H-63, Palaami Enclave, New Natham Road,
Madurai-625014.
Cell: 9994990599
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