With $1.5 million in an account expected to earn 8% annually over the retiree's 30 years of life expectancy,what annual annuity can be withdrawn,beginning today?
A) $112,150
B) $120,000
C) $123,371
D) $133,241

Question

Quizplus · Accepted Answer

To calculate the annual annuity that can be withdrawn with $1.5 million earning 8% annually over 30 years, we can use the formula for present value of an annuity:

Present Value of Annuity = Annual Withdrawal x (1 - (1 + r)^-n) / r

Where:
r = annual interest rate
n = number of years
Annual Withdrawal = what we want to solve for

Plugging in the values we have:
r = 8%
n = 30
Present Value of Annuity = $1.5 million

$1.5 million = Annual Withdrawal x (1 - (1 + 0.08)^-30) / 0.08

Solving for Annual Withdrawal:
Annual Withdrawal = $123,371

Therefore, the best choice is C.

With $15 Million in an Account Expected to Earn 8% Annually