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Mark Johnson saves a xed percentage of his salary at the end of each year. This year he saved $2000.

Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he saved $2000. For the next 4 years, he expects his salary to increase at a 2% annual rate, and he plans to increase his savings at the same 2% annual rate. He invests his money in the stock market. Thus, there will be five end-of-year investments (the initial $2000 plus four more) starting at the end of this year. Solve the problem using the geometric gradient factor. How much will the investments be worth at the end of 5 years if they increase in the stock market at a 6% annual rate? <7 pts>

Suggestion: Use geometric series to find P, then use an F/P factor to find F at end of 5 years.



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