Question

A personal account earmarked as a retirement supplement contains $342,100. Suppose $300,000 is used to establish an annuity that earns 5%, compounded quarterly, and pays $6500 at the end of each quarter. How long will it be until the account balance is $0?

Answer 1

Therefore, 144 quarters are required until the account balance is $0

Step-by-step explanation:

Present Value=Quarterly payment*(1 - (( 1+r)^(-n)) / n

$3,00,000 = $4500*(1- ((1+0.0125)^(-n))/0.0125

$3,00,000 = $360000*(1- ((1+0.0125)^(-n))

(1- ((1.0125)^(-n)) = $300000 / $360000

(1- ((1.0125)^(-n)) = 0.833333

n = 144