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What are the principal and interest portions

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Reference no: EM132900765

At the age of 54, Hillary just finished all the arrangements on her parents' estate. She is going to invest her $75,000 inheritance at 6.25% compounded annually until she retires at age 65, and then she wants to receive month-end payments for the following 20 years. The income annuity is expected to earn 3.85% compounded annually.

a) What are the principal and interest portions for the first payment of the income annuity?

b) What is the portion of interest earned on the payments made in the third year of the income annuity?

c) By what amount is the principal of the income annuity reduced in the seventh year?

Reference no: EM132900765

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