Your Aunt Annie is asking for your advice. She will receive a 4-year perpetuity star)ng...
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Your Aunt Annie is asking for your advice. She will receive a 4-year perpetuity star)ng at $800 increased by 8% per year. At the end of each year, Aunt Annie would like to reinvest the money she earned into her bank savings account. If hers account earn interest at a rate of 5% of simple interest per year. a) A]er4years,whatwouldheraccountbeworth? b) What would be the advice for aunt Annie: to keep the money at the bank and wait to generate more and then re-invest it, or to withdraw the amount of interest generated over a year, and live from the interest.
Your Aunt Annie is asking for your advice. She will receive a 4-year perpetuity star)ng at $800 increased by 8% per year. At the end of each year, Aunt Annie would like to reinvest the money she earned into her bank savings account. If hers account earn interest at a rate of 5% of simple interest per year.
a) A]er4years,whatwouldheraccountbeworth?
b) What would be the advice for aunt Annie: to keep the money at the bank and wait to generate more and then re-invest it, or to withdraw the amount of interest generated over a year, and live from the interest.
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