A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 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? (Round your answer UP to the nearest quarter.)
A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 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? (Round your answer UP to the nearest quarter.)
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 31P
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Question
Transcribed Image Text:A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 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? (Round your answer UP to the nearest quarter.)
quarters
Expert Solution
Step 1 formula to be used
future value of an annuity
FV = PMT x [(1 + i)^n - 1] / i
where FV is the future value of the annuity,
PMT is the amount of each payment,
i is the interest rate per period,
and n is the total number of periods.
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