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A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 is used to establish an annuity that earns 5%, compounded quarterly, and pays $6500 at the end of each quarter. How long will it be until the account balance is $0? (Round your answer UP to the nearest quarter.)

A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 is used to establish an annuity that earns 5%, compounded quarterly, and pays $6500 at the end of each quarter. How long will it be until the account balance is $0? (Round your answer UP to the nearest quarter.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 is used to establish an annuity that earns 5%, compounded quarterly, and pays $6500 at the end of each quarter. How long will it be until the account balance is $0? (Round your answer UP to the nearest quarter.) quarters
Transcribed Image Text:A personal account earmarked as a retirement supplement contains $292,100. Suppose $250,000 is used to establish an annuity that earns 5%, compounded quarterly, and pays $6500 at the end of each quarter. How long will it be until the account balance is $0? (Round your answer UP to the nearest quarter.) quarters
Expert Solution
Step 1 formula to be used

future value of an annuity 

FV = PMT x [(1 + i)^n - 1] / i

 

where FV is the future value of the annuity,

PMT is the amount of each payment,

i is the interest rate per period,

and n is the total number of periods.

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