You have saved $44,000 for college and wish to use $12,000 per year.If you use the money as an ordinary annuity and earn 5.15% on your investment,how many years will your annuity last? Use a calculator to determine your answer.
A)4.27 years
B)4.17 years
C)3.59 years
D)3.36 years

Question

Quizplus · Accepted Answer

We can use the formula for the present value of an ordinary annuity:

PV = PMT x ((1 - (1+r)^(-n))/r)

where PV is the present value (in this case, the amount saved for college), PMT is the yearly payment (in this case, $12,000), r is the annual interest rate (5.15%), and n is the number of years.

Plugging in the values, we get:

$44,000 = $12,000 x ((1 - (1+0.0515)^(-n))/0.0515)

Solving for n using a calculator or spreadsheet, we get:

n = 4.17 years

So the answer is choice B.

You Have Saved $44,000 for College and Wish to Use