Betty Bronson has just retired after 25 years with the electric company. Her tot
ID: 2763127 • Letter: B
Question
Betty Bronson has just retired after 25 years with the electric company. Her total pension funds have an accumulated value of $260,000, and her life expectancy is 20 more years. Her pension fund manager assumes he can earn a 13 percent return on her assets.
What will be her yearly annuity for the next 20 years? Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What will be her yearly annuity for the next 20 years? Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Explanation / Answer
As per the table of Appendix D, the PV factor for 20 years at 13% = 7.025
Therefore,
Annuity = Present value of pension funds / PV factor
= $260,000 / 7.025
= $37,011.98
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