Gracelyn, age 55, has decided to take early retirement from her position as a city manager so that she can launch a consulting career. She

is trying to decide what to do with her savings in a retirement account into which she has been paying over the past several decades. Her

options are:

A) Leave the retirement fund invested until age 67, when she expects to retire fully; or

B) Receive an annuity over the next 12 years until her retirement. The annuity, paid out at $3,000 per month, will exhaust the savings in this

particular account.

Assumptions:

• The amount in the retirement account is $300,000.

• The monthly annuity payment she will receive is $3,000 (monthly for 12 years)

• The annual interest rate on either investment is .07

• Compound monthly.

Work through the following questions to help Gracelyn make this decision and round both answers to the nearest dollar:

Calculate the future value of retaining funds in the retirement account with monthly compounding.

Answer: $ =

2. Calculate the future value of the annuity.

Answer: $ =