Your pension plan has two alternative payout methods.The first is a lump sum of $300,000 on your 65th birthday.The second is ordinary annuity with the first payment on your 66th birthday and the last payment on your 85th birthday.If the interest rate is 10.5%,then what size annuity payment would equate the value of the two alternatives?
A) $36,447.98
B) $35,911.96
C) $37,059.21
D) $35,237.89
E) $34,687.32

Question

Quizplus · Accepted Answer

PV = PMT × 11ea7fdb_fc1a_9fa1_a768_9d0824729a4e_TB2902_11 PMT = PV / 11ea7fdb_fc1a_9fa2_a768_69b9f5f3e6fc_TB2902_11 PMT = 300,000 / 11ea7fdb_fc1a_9fa3_a768_8306e6c3d387_TB2902_11 = $36,447.98
Using a financial calculator:
N = 20, I/Y = 10.5, PV = -300,000, FV = 0, cpt PMT = $36,447.98

Your Pension Plan Has Two Alternative Payout Methods