Question:

The professor responded with the following to my answer below:


1. Monthly Pension = $7500


Savings                 =$700000


Life Expectancy = 17.5 years=210 months


Long Term Bond Rate = 3% Rate/12 months = 3/12= .25 monthly rate


Annuit Payment = =PMT(0.25%,210,-700000)=$4,288.62


IRA Mandatory 4% each year IRA growth of 6% per year


700000*4%=28,0000


Liz should choose the annuity at this age.