Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An investment company offers a 15-year double your money savings plan, which requires a deposit of 10,000 at the start of each year for 15

image text in transcribed
An investment company offers a 15-year double your money" savings plan, which requires a deposit of 10,000 at the start of each year for 15 years. At the end of 15 years each participant receives 300,000 . If a participant opts out of the plan, he gets back his deposits accumulated at 4% up to the time he opts out. Opting out occurs at the start of a year when a new payment is due, from the start of the 2 nd to the start of the 5 th year. The company's experience shows that out of 100 new participants, the numbers that opt out each year are 5 at the start of the 2nd year, 4 at the start of each of the 3rd and 4th years, 3 at the start of each of the 5 th and 6 th years, 2 at the start of each of the 7th through 9 th years, and 1 at the start of each of the 10th through 15th years. The deposits received by the company can be reinvested at effective annual rate z. (a) Assuming 100 initial participants, find the company's net profit at the end of 15 years, after all plans have been settled, as a function of z, and show that it is an increasing function of z. (b) What value of z gives no net profit to the company? An investment company offers a 15-year double your money" savings plan, which requires a deposit of 10,000 at the start of each year for 15 years. At the end of 15 years each participant receives 300,000 . If a participant opts out of the plan, he gets back his deposits accumulated at 4% up to the time he opts out. Opting out occurs at the start of a year when a new payment is due, from the start of the 2 nd to the start of the 5 th year. The company's experience shows that out of 100 new participants, the numbers that opt out each year are 5 at the start of the 2nd year, 4 at the start of each of the 3rd and 4th years, 3 at the start of each of the 5 th and 6 th years, 2 at the start of each of the 7th through 9 th years, and 1 at the start of each of the 10th through 15th years. The deposits received by the company can be reinvested at effective annual rate z. (a) Assuming 100 initial participants, find the company's net profit at the end of 15 years, after all plans have been settled, as a function of z, and show that it is an increasing function of z. (b) What value of z gives no net profit to the company

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Edp Auditing A Primer

Authors: Joseph L. Sardinas

1st Edition

0471123056, 978-0471123057

More Books

Students also viewed these Accounting questions

Question

What attracts you about this role?

Answered: 1 week ago

Question

How many states in India?

Answered: 1 week ago

Question

HOW IS MARKETING CHANGING WITH ARTIFITIAL INTELIGENCE

Answered: 1 week ago

Question

5. Identify three characteristics of the dialectical approach.

Answered: 1 week ago

Question

7. Identify six intercultural communication dialectics.

Answered: 1 week ago