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How to find the interest
So If I have a savings account that has 350,000 and the interest rate is 5.5% per year compounded monthly, and I want to take out an equal payment every month for 15 years how much can I take out each month and how much interest will this account earn in the 15 years.
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You didn't specify, but it sounds like you're asking what fixed amount can be withdrawn monthly such that the account is exactly emptied out after the final withdrawal.
If so, just use your present-value-of-an-annuity formula to solve for the monthly amount. Note that the setup is identical to the situation where you've loaned someone 350K at 5.5% p.a. and you're calculating the monthly loan payment amount such that the loan is paid off in 180 monthly payments. As to the total interest earned over the life of the account, it's the excess of your total withdrawals (monthly withdrawal x 180) over the initial amount. |
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