Marie has a $1,000,000 investment portfolio and she wishes to spend $87,500 per year as an ordinary annuity.If the investment account earns 6% annually,how long will her portfolio last? Use a calculator to determine your answer.
A)11.43 years
B)14.17 years
C)19.86 years
D)23.08 years

Question

Quizplus · Accepted Answer

Using the formula for the present value of an ordinary annuity, we can calculate the number of years the portfolio will last. The formula is: PV = PMT * [(1 - (1 + r)^-n) / r]. Plugging in the values: $1,000,000 = $87,500 * [(1 - (1 + 0.06)^-n) / 0.06], solving for n gives approximately 19.86 years.

Marie Has a $1,000,000 Investment Portfolio and She Wishes to Spend