Hello,

Can someone please explain how the PMT function work in excel? I have a project where I am trying to calculate the annuities and my answer is coming out too small. I'm pretty sure I'm doing something wrong here.

Here is the question:

Liz has retired from the US Postal Service and will turn 70 next year.After 39 years of service, her monthly pension is $7,500. She does not qualify for Social Security. Liz has accumulated $700,000 in her thrift savings plan. The government requires that she convert it to an annuity or move it to an IRA.All of the money is pretax, and tax can be avoided if it is moved to the IRA. The annuity will be calculated based on her life expectancy of 17.5 years after age 70.https://www.ssa.gov/cgi-bin/longevity.cgi.The current US Treasury long-term bond rate is 3.0%. How much will she get as an annuity monthly payment?Should Liz take the annuity or move the money to the IRA? The tax regulations require that she take out 4% of the amount each year.

When I enter the PMT function using the following =PMT(0.0025,210,-700,0), my answer come to $4.29 for the first part of the questions. I haven't begun working on part 2 of the question.

Thanks in advance for any assistance you can offer me.

Michelle