You inherit $300,000 from your parents and want to use the money to supplement your retirement.You receive the money on your 65th birthday,the day you retire.You want to withdraw equal amounts at the end of each of the next 20 years.What constant amount can you withdraw each month and have nothing remaining at the end of 20 years if you are earning 7% interest compounded monthly?
A) $1,200
B) $1,829
C) $2,326
D) $2,943

Question

Quizplus · Accepted Answer

The correct choice is calculated using the formula for the annuity payment: PMT = P * (r(1+r)^n) / ((1+r)^n - 1), where P is the principal ($300,000), r is the monthly interest rate (7% annually, or 0.07/12 monthly), and n is the total number of payments (20 years * 12 months).

You Inherit $300,000 from Your Parents and Want to Use