Question

Sammy has worked for a company with a retirement program, and today is retiring from her job with the amount of $105 in her retirement account. She decides to withdrawal an equal amount from this account, once a year, beginning immediately, and ending 17 years from today (for a total of 18 payments). If the interest rate is 6.50%, solve for the annuity amount such that she uses up her full accumulation.

Answer 1

Answer:

Annuity amount is $9.45

Explanation:

The amount that Sammy can withdraw from the account each can computed using the PMT formula in excel as follows:

=pmt(rate,nper,pv,fv,type)

rate is the of return on the account which is 6.5%

nper is the number of withdrawals to be made from the account which is 18 withdrawals

pv is the amount in the account presently i.e $105

fv  is the total amount of withdrawals from the account which is not known hence taken as zero

type is 1 for annuity due such as this one,0 for ordinary annuity

=pmt(6.5%,18,-105,0,1)

=$9.45