a retirement plan guarantees to pay you a fixed amount for 25 years. at the time of retirement, you will have $100,000 to your credit in the plan. the plan anticipates earning 7% interest annually over the period you receive benefits. assume the first payment occurs one year from your retirement date, how much will your annual benefits be

The annual benefits will be$8,581.05

Explanation:

The applicable formula is the present value of an ordinary annuity, which is given as;

PV=A * (1 - (1+r) ^-N) / r

PV is the amount that would be in the plan at retirement which is $100,000

A is the annual benefits which is unknown

n is the number of years the investment would take which is 25 years

r is the rate of return on investment which is 7%

A=PV / (1 - (1+r) ^-N) / r

A=100000 / (1 - (1+7%) ^-25/7%

A=100000/1 - (1.07) ^-25/0.07

A=100000 / (1-0.184249178) / 0.07

A=100000/11.65358317

A=$8581.05