father's employer was just acquired, and he was given a severance payment of $375,000, which he invested at a 7.5% annual rate.He now plans to retire, and he wants to withdraw $35,000 at the end of each year, starting at the end of this year.What is the maximum number of whole payments that can be withdrawn before the account is exhausted; i.e., before the account balance would become negative? (Hint: Round down to the nearest whole number.)
A)22
B)23
C)24
D)25
E)26

Question

Quizplus · Accepted Answer

The correct answer is A.The present value of the withdrawals is:PV = $35,000 * (1 - (1 + 0.075)^-23) / 0.075 = $637,500The maximum number of whole payments that can be withdrawn before the account is exhausted is:23

Father's Employer Was Just Acquired, and He Was Given a Severance