Question

.  Jennifer’s pension plan is an annuity. Over her working life, she accumulates $ 499,000 in her retirement account. The annual interest rate is 4%. The pension is then paid out quarterly based on a 25-year payout period. How much will Jennifer receive per quarter after she retires?

Answer 1

We can use financial calculator for calculation of quarterly payments she will receive with below keystrokes.

Payment is quarterly. so, payout period and interest rate will be quarterly. there are 4 quarters (3-month periods) in a year

N = quarterly payout period = 25*4 = 100; I/Y = quarterly interest rate = 4%/4 = 1%; FV = future value = $0; PV = present value = $499,000 > CPT = compute > PMT = quarterly payments = $7,917.01

calculator will show PMT as negative value because it's a cash outflow.

Jennifer will receive $7,917.01 per quarter after she retires.