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( 1 ) A continuous annuity is a steady stream of money that is paid to a person or group out of an interest bearing
A continuous annuity is a steady stream of money that is paid to a person or group out of an interest bearing account. Such an annuity may be established, for exam ple, by making as initial deposit in a savings account and then making continuous withdrawals to pay the annuity. Suppose an initial deposit of $ is put into an account which earns interest compounded continuously. Also suppose you immediately start withdrawals at a rate of $ per year. a Set up a differential equation that is satisfied by yt the amount of money in the account at time t measured in years. b Sketch the solution to this equation given by the initial condition provided. c What happens to the account in the long run? d If you wanted to live off the $ per year for the rest of your life, how much money do you need to initially deposit? Note: This is a nice way to live, if you can swing it
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