10
QuizMultiple Choice

Topic Test

Question 10 • FT GMS AMDM B IC – 72

As part of your retirement plan, you want to set up an annuity in which a regular payment of $80,121 is made at the end of each year. You need to determine how much money must be deposited earning 10% compounded annually in order to make the annuity payment for 20 years. Round your answer to the nearest cent.

Answer
A
$680,153.78
B
$681,426.87
C
$682,115.24
D
$683,759.64

Explanation

Because each $80,121 payment is made at the end of the year, this is an ordinary annuity. Its present value is $80,121 × [1 − (1.10)^−20] ÷ 0.10, which is approximately $682,115.24. So the amount to deposit is choice C, $682,115.24.

AI-written and checked against the verified answer.

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