Willis has won the $4,700,000 state lottery and intends to save all of the money for his retirement.He chooses to receive an annual cash flow of $235,000 for twenty years,with the first payment to be received one year from today.How much money will be in his retirement account in twenty years if he can reinvest his money at an annual rate of 6.75%?
A)$9,374,989
B)$17,356,235
C)$10,007,801
D)$4,700,000

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used to calculate how much money will be in the account after 20 years. The formula is FV = Pmt * [((1 + r)^n - 1) / r], where Pmt is the annual payment, r is the interest rate, and n is the number of periods. Plugging in the values: FV = $235,000 * [((1 + 0.0675)^20 - 1) / 0.0675] = $9,374,989.

Willis Has Won the $4,700,000 State Lottery and Intends to Save