A Retirement Annuity Contract matures at 600,000; the owner wishes to buy an annuity that pays 24,000 per year; at an annuity rate of 4%, how much fund is required?

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Multiple Choice

A Retirement Annuity Contract matures at 600,000; the owner wishes to buy an annuity that pays 24,000 per year; at an annuity rate of 4%, how much fund is required?

Explanation:
The annual income from an annuity is the fund times the annuity rate, so the fund needed is the annual payment divided by the rate. Here, 24,000 per year ÷ 0.04 equals 600,000. Since the contract matures at 600,000, it can fund the 24,000 per year annuity at a 4% rate. The required fund is €600,000.

The annual income from an annuity is the fund times the annuity rate, so the fund needed is the annual payment divided by the rate. Here, 24,000 per year ÷ 0.04 equals 600,000. Since the contract matures at 600,000, it can fund the 24,000 per year annuity at a 4% rate. The required fund is €600,000.

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