Sam received a lump sum of $135 000 as an inheritance from his great grandmother. He plans to invest them for 20 years in a long-term investment fund with an expected rate of return of 9% compounded monthly. After 20 years, what payment can he withdraw at the beginning of each month for 10 years?

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the annuity is $135,000 and the interest rate is 9% compounded monthly. The number of periods is 20 years * 12 months/year = 240 months. The payment can be calculated using the formula:PMT = PV * (r / (1 - (1 + r)^-n))where:PMT is the paymentPV is the present valuer is the interest raten is the number of periodsPlugging in the values, we get:PMT = 135,000 * (0.09 / (1 - (1 + 0.09)^-240))PMT = $10,200

Sam Received a Lump Sum of $135 000 as an Inheritance