Mike joins a savings program where he deposits $1000 at the begint he will earn a perpetuity paying $6300 per year with the first payment at the end of the 30th year. The effective interest rate is 5% for the first 20 years and 8% afterward a) Will Mike have accumulated enough to fund the perpetuity? • b) If your answer above is no, find the unique extra deposit X that Mike has to make at the end of the 28th year in order to fund the perpetuity
Mike joins a savings program where he deposits $1000 at the begint he will earn a perpetuity paying $6300 per year with the first payment at the end of the 30th year. The effective interest rate is 5% for the first 20 years and 8% afterward a) Will Mike have accumulated enough to fund the perpetuity? • b) If your answer above is no, find the unique extra deposit X that Mike has to make at the end of the 28th year in order to fund the perpetuity
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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Transcribed Image Text:Mike joins a savings program where he deposits $1000 at the beginning of each year for 25 years, In return,
he will earn a perpetuity paying $6300 per year with the first payment at the end of the 30th year. The
effective interest rate is 5% for the first 20 years and 8% afterward
• a) Will Mike have accumulated enough to fund the perpetuity?
• b) If your answer above is no, find the unique extra deposit X that Mike has to make at the end of the 28th
year in order to fund the perpetuity
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