# Thread: Forming an equation, then finding when last $400 is received 1. ## Forming an equation, then finding when last$400 is received

Mrs Wong retired in 2006, she put a sum of $5000 into a fund that has a constant rate of return of 5 % per annum. Starting in 2006, she withdraws$400 each year and gives the money to her granddaughter as a birthday gift.

a) Denote the amount of money Mrs Wong has at time t years by $x. b) In which year will the granddaughter receive her last$400?

a) x $=5000+\frac{(5000)(1-0.05^t)}{1-0.05}-400t$

b) In the year granddaughter receives last $400, $x<400$ $5000+\frac{(5000)(1-0.05^t)}{1-0.05}-400t<400$ 2. ## Re: Forming an equation, then finding when last$400 is received

Originally Posted by Punch
Mrs Wong retired in 2006, she put a sum of $5000 into a fund that has a constant rate of return of 5 % per annum. Starting in 2006, she withdraws$400 each year and gives the money to her granddaughter as a birthday gift.

a) Denote the amount of money Mrs Wong has at time t years by $x. b) In which year will the granddaughter receive her last$400?

a) x $=5000+\frac{(5000)(1-0.05^t)}{1-0.05}-400t$

b) In the year granddaughter receives last \$400, $x<400$

$5000+\frac{(5000)(1-0.05^t)}{1-0.05}-400t<400$
Part (a) is wrong.

$x_0=5000$; (or $4600$ depending on the interpretation of the wording of the question)

$x_1=x_0(1+0.05)-400$

$x+2=(x_0(1+0.05)-400)(1+0.05)-400=x_0(1+0.05)^2-400(1+(1+0.05)$

:
:

$x_k=x_0(1+0.05)^k-400[1+(1+0.05)+...+(1+0.05)^{k-1}]\\ \\ \phantom{SSSS}=x_0(1+0.05)^k-400\frac{1-(1+0.05)^k}{1-(1+0.05)}$

CB