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Diane's father, James, is about to retire and is wondering what to do with his superannuation money. He has $350 ODD to invest, and is
Diane's father, James, is about to retire and is wondering what to do with his superannuation money. He has $350 ODD to invest, and is considering the following options: Uption It Option B Reducing Balance annuity Perpetuity Interest: 5.2% per annurn Interest: 435:: per annnrn {compoun ding monthly] [compounding quarterly] a. I Howr many monthly payments would James receive if he invests in the annuity for 25 years? ii. Calculate the payment he would receive per month if he invests in the reducing balance annuity for 25 years? b. If he invests $850 [tilt] in the perpetuity. hovlr much will James receive per quarter? Simple interest PrT 100 Compound interest r A = PR" , where R = 1+ 100 The annuities formula - reducing balance loans A = PR Q (R" - 1) R - 1 .Where R = 1 +- 100 The annuities formula - investments Q (R - 1) r A = PR" + R - 1 .where R = 1+- 100 Interest-only loans (& Perpetuities) Pr Payment (or Q) =- 100
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