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When Bruce retired on his 67th birthday, he had $900 000 in his superannuation account, which was paying compound interest of 5% per annum, added to the account at the end of each year. Immediately after the interest was added, Bruce makes a withdrawal for expenses for the coming year.

Math

When Bruce retired on his 67th birthday, he had $900 000 in his superannuation account, which was paying compound interest of 5% per annum, added to the account at the end of each year. Immediately after the interest was added, Bruce makes a withdrawal for expenses for the coming year.

[Solved Math]

When Bruce retired on his 67th birthday, he had $900 000 in his superannuation account, which was paying compound interest of 5% per annum, added to the account at the end of each year. Immediately after the interest was added, Bruce makes a withdrawal for expenses for the coming year. The first withdrawal is $p. Each subsequent withdrawal is 7% greater than the previous one.

Let $An, be the amount in the account after the nth withdrawal.

  1. Show that A2 = 900 000(1.05)2 – P[(1.05) + (1.07)).
  2. Show that A3 = 900 000(1.05)3 – P[(1.05)2 + (1.05)(1.07) + (1.07)2).

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