You start an annuity with $1million and expect to receive 12 equal payments beginning at the end of the first year.The guaranteed annual interest rate is 6 percent.The annual payments that you expect to collect are

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11efb84d_a0a4_4f71_9137_b92ceeccc350_TB1314_00 To calculate the annual payments, we use the formula for the present value of an annuity:
PV = P*(1-(1+r)^(-n))/r
where PV is the present value, P is the payment, r is the interest rate per period, and n is the number of periods.

We know that PV = $1million, r = 6% or 0.06, and n = 12. We need to solve for P:
$1million = P*(1-(1+0.06)^(-12))/0.06
$1million*0.06 = P*(1-(1+0.06)^(-12))
0.06 = 1-(1+0.06)^(-12)
(1+0.06)^(-12) = 0.943
P = $1million/0.943
P = $1,192,770.28

Therefore, the annual payments that you expect to collect are $119,277.03 (rounded to the nearest cent), which is option B.

You Start an Annuity with $1million and Expect to Receive