Question

Sammy has worked for a company with a retirement program, and today is retiring from her job with the amount of $143 in her retirement account. She decides to withdrawal an equal amount from this account, once a year, beginning immediately, and ending 17 years from today (for a total of 18 payments). If the interest rate is 6.50%, solve for the annuity amount such that she uses up her full accumulation.

Place your answer to the nearest dollar amount. Do not use a dollar sign or comma as part of your answer. For example, an answer of fifty thousand and thirty two dollars would be placed as 50032. Work answers out to at least 4 decimal points of accuracy.

Answer 1

12870.62

Step-by-step explanation:

I assume that Sammy has $143,000 on her retirement account.

this is an annuity due (the first distribution is received immediately), so we can use the present value of an annuity due formula to calculate the yearly distributions:

PV = payment x annuity factor

• PV = $143,000
• PV annuity due factor, 6.5%, 18 periods = 11.11058

payment = $143,000 / 11.11058 = $12,870.62