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43. *** As part of your personal budgeting process, you have determined that at the end of each of the next five years you will
43. *** As part of your personal budgeting process, you have determined that at the end of each of the next five years you will incur significant maintenance expenses on your apartment. You'd like to cover these expenses by depositing a lump sum in an investment account today (or year 0) that earns 8% per annum. You will draw down this account each year as maintenance bills come due. End of Year Budget Shortfall $5,000 $4,000 $6,000 $10,000 $3,000 5 a) How much money must you deposit today to cover these expenses? Round your calculations to the nearest dollar. b) Demonstrate that the amount you have deposited today is just enough to cover your expenses over the five-year period. That is, move forward in time on a yearly basis and show that by the end of the five-year time horizon you will have no funds remaining in your account. Show all calculations. c) What effect does an increase in the interest rate have on the amount calculated in part (a)? Explain
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