You are retiring and the balance of your RRSP is $203 126. You are wondering what amount of monthly income this could provide you for 20 years if you can get a nine percent return.

Question

Quizplus · Accepted Answer

To calculate the monthly income, we can use the present value of an annuity formula:

PMT = [PV * r * (1+r)^n] / [(1+r)^n - 1]

Where PV is the present value (balance of RRSP), r is the interest rate per period (9%/12 = 0.75%), and n is the total number of periods (20 years * 12 months = 240 months).

Plugging in the numbers:

PMT = [$203126 * 0.75% * (1+0.75%)^240] / [(1+0.75%)^240 - 1]
PMT = $1828

Therefore, the monthly income that could be provided for 20 years is $1828. Choice (A) is the correct answer.

You Are Retiring and the Balance of Your RRSP Is