Answer: the amount of the annuity is $501000
Explanation:
We would apply the future value which is expressed as
FV = C × [{(1 + r)^n - 1}/r]
Where
C represents the yearly payments.
FV represents the amount of money
in your account at the end of 25 years.
r represents the annual rate.
n represents number of years or period.
From the information given,
r = 4% = 4/100 = 0.04
C = $12000
n = 75 - 50 = 25
Therefore,
FV = 12000 × [{(1 + 0.04)^25 - 1}/0.04]
FV = 12000 × [{2.67 - 1}/0.04]
FV = 12000 × 41.75
FV = $501000