You have saved $47,000 for college and wish to use $15,000 per year.If you use the money as an ordinary annuity and earn 6.15% on your investment,how many years will your annuity last? Use a calculator to determine your answer.
A)4.27 years
B)3.13 years
C)3.59 years
D)3.36 years

Question

Quizplus · Accepted Answer

This problem can be solved using the formula for the present value of an ordinary annuity:

PV = A * ((1 - (1 + r)^(-n)) / r)

where PV is the present value (amount saved), A is the annual payment, r is the interest rate, and n is the number of years.

Plugging in the given values, we get:

$47,000 = $15,000 * ((1 - (1 + 0.0615)^(-n)) / 0.0615)

Simplifying and solving for n, we get:

n = 3.59 years (rounded to two decimal places)

Therefore, the best choice is C.

You Have Saved $47,000 for College and Wish to Use