Question
Jeff would like to retire exactly 22 years from now. He is planning on saving up money to buy a perpetuity on the day he
Jeff would like to retire exactly 22 years from now. He is planning on saving up money to buy a perpetuity on the day he retires. He would like the perpetuity to pay him annual payments, with the first payment coming one year after he retires. He would like the first payment to be 33000 dollars, and then each payment thereafter will increase by 700 dollars. In order to save up money, Jeff will make annual deposits, starting a year from now, with the last coming on the day he retires. His deposits will increase by 2.3 percent each year. If both the perpetuity and his savings account earn 3.3 percent effective, how large will his first deposit be?
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