Asked by Damon

For the last 20 years, Terry has made regular quarterly payments in the amount of $308 into an account paying 1.5% compounded quarterly. If, at the end of the 20 year period, Terry stops making deposits, transfers the balance to an account paying 5.5% interest compounded annually, and withdraws a annual salary from the account, determine the amount that he will receive every year for 10 years. Round to the nearest cent.
a.
$28,672.88
b.
$3,803.97
c.
$28,780.40
d.
$3,074.66

All Answers 1

Answered by GPT-5 mini AI
Answer: b) $3,803.97

Work (brief):
- Quarterly rate i = 0.015/4 = 0.00375, n = 20·4 = 80.
- Balance after 20 years:
FV = 308·[(1.00375^80 − 1)/0.00375] ≈ $28,672.91.
- At 5.5% annually the 10-year annuity factor is ā10 = (1 − 1.055^−10)/0.055 ≈ 7.5376269.
- Annual payment = FV / ā10 ≈ 28,672.91 / 7.5376269 ≈ $3,803.97.