# Your father's employer was just acquired, and he was given a severance payment of $550,000, which...

## Question:

Your father's employer was just acquired, and he was given a severance payment of $550,000, which he invested at a 3.5% annual rate. He now plans to retire, and he wants to withdraw $25,000 at the end of each year, starting at the end of this year. How many years will it take to exhaust his funds, i.e., run the account down to zero?

A. 16.60

B. 22.00

C. 42.72

D. 89.85

## Annuity:

Annuity is a sequence of equal cash flows that take place at regular intervals of time over a given period of time. For instance, withdrawals of equal amount made at the end of each year for a specified time period have characteristics of an annuity.

## Answer and Explanation: 1

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View this answerFollowing is the formula that will allows us to calculate the number of years it will take to run the account down to zero. The formula derives from...

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Chapter 8 / Lesson 3Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.

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