Witzke retired from Ontario Hydro and received a payment of $980 000.00 at age 56. He invested that sum of money at 5.5% compounded semi-annually until he was 65. At that time he converted the existing balance into an ordinary annuity paying $10 250.00 every month, with interest at 5% compounded monthly. How many payments will be made?

Question

Quizplus · Accepted Answer

The correct answer is A because the number of payments is 252. The present value of the annuity is $980,000.00. The monthly interest rate is 5%/12 = 0.4167%. The number of payments is 252 because 252 * $10,250.00 = $2,585,000.00, which is the present value of the annuity.

Witzke Retired from Ontario Hydro and Received a Payment of $980