Your brother has offered to give you $ 165?, starting next? year, and after that growing...
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Your brother has offered to give you $ 165?, starting next?year, and after that growing at 2.8 % per year for the next 20years. You would like to calculate the value of this offer bycalculating how much money you would need to deposit in a localbank so that the amount will generate the same cash flows as he isoffering you. Your local bank will guarantee a 6.4 % annualinterest rate so long as you have money in the account.
a. How much money will you need to deposit into the account?today?
b. Assuming you deposited the amount of money in part ?(a?), andthen withdrew the required payments each? year, calculate theremaining balance at the end of years? 1, 2, 10 and 19.? (Hint: Tosolve this problem it is best to use an excel? spreadsheet.)??
Your brother has offered to give you $ 165?, starting next?year, and after that growing at 2.8 % per year for the next 20years. You would like to calculate the value of this offer bycalculating how much money you would need to deposit in a localbank so that the amount will generate the same cash flows as he isoffering you. Your local bank will guarantee a 6.4 % annualinterest rate so long as you have money in the account.
a. How much money will you need to deposit into the account?today?
b. Assuming you deposited the amount of money in part ?(a?), andthen withdrew the required payments each? year, calculate theremaining balance at the end of years? 1, 2, 10 and 19.? (Hint: Tosolve this problem it is best to use an excel? spreadsheet.)??
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