Question

An insurance settlement of $2.5 million must replace Trixie Eden's income for the next 45 years. What income will this settlement provide at the end of each month if it is invested in an annuity that earns 7.5%, compounded monthly

Answer 1

$16,184.66

Step-by-step explanation:

The computation of the income that needed at the end of the each month is shown below:

Here we use the PMT function

Given that

Present value = $2,500,000

NPER = 45 × 12 = 540

RATE = 7.5% ÷ 12 = 0.625

FV = $0

The formula is shown below:

= PMT(RATE;NPER;-PV;FV;TYPE)

After applying the above formula

The present value comes in negative

The monthly payment is $16,184.66