Question

as the most successful contestant in the history of the television show jeopardy, ken jennings won more than $2.5 million. suppose he invested $1.2 million in an ordinary annuity that earned 5.5%, compounded monthly. how much would he receive at the end of each month for the next 20 years?

Answer 1

To calculate how much Ken Jennings would receive at the end of each month for the next 20 years, we need to use the formula for the future value of an ordinary annuity.

Step-by-step explanation:

To calculate how much Ken Jennings would receive at the end of each month for the next 20 years, we can use the formula for the future value of an ordinary annuity:

FV = PMT * [(1 + r/n)^(n*t) - 1]/(r/n)

Where:

• FV = future value
• PMT = monthly payment
• r = annual interest rate
• n = number of compounding periods per year
• t = number of years

In this case, Ken invested $1.2 million in an annuity with a 5.5% interest rate compounded monthly. Therefore:

PMT = $1.2 million * (0.055/12)

FV = PMT * [(1 + r/n)^(n*t) - 1]/(r/n)