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Betty Bronson has just retired after 25 years with the electric company. Her total pension funds...

Betty Bronson has just retired after 25 years with the electric company. Her total pension funds have an accumulated value of $340,000, and her life expectancy is 16 more years. Her pension fund manager assumes he can earn a 11 percent return on her assets.

What will be her yearly annuity for the next 16 years

ANNUAL INTEREST RATE

# of times Interest is compounded during 1 year

TERM

# OF PERIODS

INTEREST RATE PER PERIOD

PRESENT VALUE (Lump Sum)

FUTURE VALUE (Lump Sum)

FV of Annuity

PV of Annuity

Formula (see below)

Formula you are using to solve problem. Enter the letter of the formula into the chart.

a.

FV = PV (1 + i)n

b.

PV = FV (1/(1 + i)n)

c.

FVA = Pmt Amt (FVIFA)

d.

PVA = FV (PVIFA)

To interpolate:

Interest Rate or Year

Interest Factor

Bottom Range

Calculated Interest Factor

Upper Range
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Answer #1

11% 16 340,000 Annual Interest rate, RATE Number of Annual payments, NPER Iniial balance in account today, PV Bal. in loan account at the end, FV Annuity payment type, TYPE Annuity payments for next 16 years$46,075.69 Ref: NOTE] $0 [Because all will be withdrawn at the end] 0 0 if withdrawn at the end of each year; 1 if withdrawn at the beginning of each year NOTE Annuity payments for next 16 years is calculated using EXCEL FUNCTION PMT(rate,nper, pv,fv,type) where rate-11%; nper=16; pv-340000; fv:0; type 0; Here, value for pv is negative because it denotes cash inflow; type-0 as annuity payments occur at the end of each year only 11% 16 $340,000 1 Annual Interest rate, RATE 2 Number of Annual payments, NPER 3 Iniial balance in account today, PV 4 Bal. in loan account at the end, FV 5 Annuity payment type, TYPE 6 Annuity payments for next 16 years $O [Because all will be withdrawn at the end] 0 0 if withdrawn at the end of each year; 1 if withdrawn at the beginning of each year -PMT(B1,B2,-B3,B4,B5) [Ref: NOTEI

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