If $91,000 is invested in an annuity that earns an annual rate of 7.5%, compounded quarterly, what payments will it provide at the end of each quarter for the next 8.5 years? Round your answer to the nearest cent.
A) $3,125.42
B) $3,643.82
C) $2,786.85
D) $2,550.88
E) $2,378.88

Question

If $91,000 is invested in an annuity that earns an annual rate of 7.5%, compounded quarterly, what payments will it provide at the end of each quarter for the next 8.5 years? Round your answer to the nearest cent. ​
A) $3,125.42
B) $3,643.82
C) $2,786.85
D) $2,550.88
E) $2,378.88

Quizplus · Accepted Answer

We can use the formula for quarterly compounded annuity payments:

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

where:
r = quarterly interest rate = 7.5%/4 = 0.01875
n = number of quarterly payments = 34 (8.5 years x 4 quarters per year)
PV = present value = $91,000

Plugging in the values, we get:

P = (0.01875*(1+0.01875)^34/((1+0.01875)^34 - 1)) * $91,000
P ≈ $3,643.82

So the answer is (B) $3,643.82.

If $91,000 Is Invested in an Annuity That Earns an Annual