Determining the interest rate necessary to retain a certain balance after sixty monthly withdrawals
I have seen many examples online for "Time Value Money" and "sinking funds". I want to know how I can combine any type of solver in the PMT-PV equation? Because all these examples have known FV, PV, and i (interest rate) and they all solve for PMT, but I want to solve for i.
Example: I have 10 million in the bank account, and I want to have 5 million in the balance of the account after 5 years. I want to make a withdrawal of 100 thousand every month (end of month), so I have to know what interest rates I am seeking for so this would work for me.
Any help?
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You need to solve the money-weighted return equation. It cannot be expressed as a formula for the interest, but it can be solved numerically as shown here.
Using the OP's figures, with monthly withdrawals of 0,000.
The summation for the withdrawals can be replaced with the standard annuity formula. The resulting monthly return is converted to a nominal annual return compounded monthly.
Money-weighted return equation with start and end balances s0 and s1
The interest is 2.63282 % per annum, nominal compounded monthly.
Selectable equation
10000000 - (100000 - 100000 (1 + x)^-60)/x - 5000000/(1 + x)^60 = 0
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