Graham Bell has just retired after 30 years with the telephone company. His tota

Question

Graham Bell has just retired after 30 years with the telephone company. His total pension funds have an accumulated value of $400,000, and his life expectancy is 16 more years. His pension fund manager assumes he can earn a 10 percent return on his assets.

What will be his yearly annuity for the next 16 years? (Use a Financial calculator to arrive at the answer. Round the final answer to the nearest dollar amount.)

Graham Bell has just retired after 30 years with the telephone company. His total pension funds have an accumulated value of $400,000, and his life expectancy is 16 more years. His pension fund manager assumes he can earn a 10 percent return on his assets.

Explanation / Answer

Principal = $ 400,000 Interest rate = 10% and Term = 16 years

The Future Value Interest Factor for an Annuity PVIFA (10% , 16 years) = 7.824

Therefore, Annuity = 400,000 / 7.824 = $ 51,124.74

Annuity = $ 51,124.74

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