For the last 10 years, Megan has made regular semiannual payments of $1,624.13 into an account paying 1.5% interest, compounded semiannually. If, at the end of the 10 year period, Megan stops making deposits, transfers the balance to an account paying 2.3% interest compounded monthly, and withdraws a monthly salary for 5 years from the new account, determine the amount that she will receive per month. Round to the nearest cent.

The semiannual interest rate is 1.5% ÷ 2 = 0.75%, and there are 20 deposits. The accumulated balance is $1,624.13 × [((1.0075)^20 − 1) ÷ 0.0075] ≈ $34,904. At 2.3% compounded monthly, the monthly rate is 0.023 ÷ 12, with 60 withdrawals; using the present value formula for an ordinary annuity gives a monthly withdrawal of about $616.39. Megan will receive $616.39 per month, choice A.

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