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Chapter 4: 4-9-35BP (page 284)

Question: Betty Bronson has just retired after 25 years with the electric company. Her total pension funds have an accumulated value of $180,000, and her life expectancy is 15 more years. Her pension fund manager assumes he can earn a 9 percent return on her assets. What will be her yearly annuity for the next 15 years?

Short Answer

Expert verified

Answer

The yearly annuity will be $22,330.60.

Step by step solution

01

Identification of the required information

Present value (PV) = $180,000

Periods (n) = 15

Interest rate (i) = 9%

02

Computation of the yearly annuity (PMT)

PV=PMT脳[1-1+i-ni]$180,000=PMT脳[1-(1+9%)-159%]PMT=$22,330.60

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