Question

As the most successful contestant in the history of the television show Jeopardy, Ken Jennings won more than $2.5 million. Suppose he invested $1.2 million in an ordinary annuity that earned 4.25%, compounded monthly. How much would he receive at the end of each month for the next 20 years?

Answer 1

Answer:

receive at the end of each month is $7591.79

Explanation:

given data

won = $2.5 million

invested = $1.2 million

earned = 4.25%

time = 20 year

to find out

How much would he receive at the end of each month

solution

we consider monthly annuity = P

so present value of money invested will be express here as

present value of money = monthly annuity × $\frac{1-(1+\frac{r}{n})^{-t*n}}{\frac{r}{n}}$      ............................1

here r is rate and n is 12 months in a year and t is time period

put value in equation 1

1200000 = P × $\frac{1-(1+\frac{0.045}{12})^{-20*12}}{\frac{0.045}{12}}$  

solve it we get

P = $7591.79

receive at the end of each month is $7591.79