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Joe Hernandez has inherited $25,000 and wishes to purchase an annuity that will provide him with a steady income over the next12 years. He has heard that the local savings and loan association is currently paying6 percent compound interest on an annual basis. If he were to deposit his funds, what year-end equal-dollar amount (to the nearest dollar) would he be able to withdraw annually such that he would have a zero balance after his last withdrawal12 years from now?
I believe the answer would be to divide the25000 by an annuity factor of6%12years and you get the equal annual amounts to be paid in this case it would be25000/8.384=2982 approx per annum.
