Challenge: The lottery prize is 20 consecutive annual payments of $50,000 beginning one year from today. And as an added bonus, the fifth amount includes a $25,000. If all amounts from the prize are invested in a bank that pays 5%, how much will they have at the end of year 20? Tip: First, draw a timeline. Then, try to reduce the number of calculations down to a minimum. That is, keep the annuity intact, and treat the lump sum of $25,000 to be compounded separately.

Sally is 25 years old and has decided to start a retirement program. Beginning in exactly one year, she will save $15,600 per year for 40 consecutive years to support their retirement. When she reaches retirement at age 65, how much will she have saved for her retirement? Assume the rate of 2%.

Sally in the example above will make annual withdrawals for 26 consecutive years beginning immediately. What is the amount she can withdraw each year if interest rate is 2%?