Chapter 3, number 8
43.
(S08T1) Kurt is the beneficiary of a trust. Under the trust, he will
receive payments at the end of each year for the next 20 years. The
payment will be 2000 at the end of one year. Each subsequent payment
will increase by 8%. In other words, the payment at the end of the
second year will be 2000(1.08), the payment at the end of the third year
will be 2000(1.082), etc. Calculate the present value of Kurt’s payments
under the trust using an annual effective interest rate of 9%.
44.
(S09T1) Parker has won the lottery. He will receive 20 annual
payments with the first payment made now. The first payment will be
for 25,000. Each subsequent payment will be 110% of the previous
payment. In other words, the second payment will be 25000(1.10) and
the third payment will be 25000(1.10)2, etc. Calculate the present value
of Parker’s winnings using an annual effective interest rate of 5%.
45.
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 Spring '08
 Staff
 Math, Time Value Of Money, Perpetuity, Payment, Kurt

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