Suppose Becky has her choice of $10,000 at the end of each month for life or a single prize of $1.5 million. She is 35 years old and her life expectancy is 40 more years. If she takes the $1.5 million, spends $700,000 of it, and invests the remainder at an annual rate of 7.0% compounded monthly, what monthly annuity will she receive for the next 40 years? Round your answer to the nearest cent.
A)$497.15
B)$4,971.45
C)$52,821.66
D)$1,864.29
E)$7,457.18

Question

Suppose Becky has her choice of $10,000 at the end of each month for life or a single prize of $1.5 million. She is 35 years old and her life expectancy is 40 more years. If she takes the $1.5 million, spends $700,000 of it, and invests the remainder at an annual rate of 7.0% compounded monthly, what monthly annuity will she receive for the next 40 years? Round your answer to the nearest cent. ​
A)$497.15
B)$4,971.45
C)$52,821.66
D)$1,864.29
E)$7,457.18

Quizplus · Accepted Answer

After spending $700,000, Becky invests $800,000 at 7% annual interest compounded monthly. Using the formula for the future value of an annuity, she can receive approximately $4,971.45 monthly for 40 years.

Suppose Becky Has Her Choice of $10,000 at the End