Question

Auntie Kitty sells her home for $250,000, which is then invested to earn 4 percent annually. If her life expectancy is ten years, what is the maximum amount she can annually spend on a nursing home, doctors, and taxes? Use Appendix D to answer the question. Round your answer to the nearest dollar.
The maximum amount that can be annually spend is $   .

If the return were to double to 8 percent, will the amount she may spend each year more than double? Use Appendix D to answer the question. Round your answer to the nearest dollar.
If the return were to double, the amount that can be annually spend will

-Select- more than double , less than double, or double and will be equal to $   .

Answer 1

When interest rate 4% is:

	Annuity payment=	P/ [ [1- (1+r)-n ]/r ]
P=	Investment	250,000.00
r=	Rate of interest per period
	Rate of interest per annum	4.0%
	Payments per year	1.00
	Rate of interest per period	4.000%
n=	number of payments:
	Number of years	10
	Payments per year	1.00
	number of payments	10
	Annuity payment=	250000/ [ (1- (1+0.04)^-10)/0.04 ]
	Annuity payment=	30,822.74

when interest rate 8%:

	Annuity payment=	P/ [ [1- (1+r)-n ]/r ]
P=	Investment	250,000.00
r=	Rate of interest per period
	Rate of interest per annum	8.0%
	Payments per year	1.00
	Rate of interest per period	8.000%
n=	number of payments:
	Number of years	10
	Payments per year	1.00
	number of payments	10
	Annuity payment=	250000/ [ (1- (1+0.08)^-10)/0.08 ]
	Annuity payment=	37,257.37

Answer is:

Less than double and equal to 37,257.37

please rate.