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Bill is due to retire in 20 years, at which time he will start collecting pension benefits.His employer is scheduled to begin funding Bill's pension
Bill is due to retire in 20 years, at which time he will start collecting pension benefits.His employer is scheduled to begin funding Bill's pension benefits with the first annual payment due at the end of year 1 and the last annual payment due at the end of year 20. The initial employer's contribution is $2,000 and will increase by 3% per year. Employer contributions will earn interest at an annual effective interest rate of 7%. Bill's employer can elect alternative funding: annual contributions beginning at the end of year 6 with the last contribution at the end of year 20. These annual contributions begin at $1,000 and increase by $Q per year. Under this alternative funding, the employer's contribution will earn an annual effective interest rate of 8%. Determine Q so that both funding options have the same accumulated value at the end of year 20
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