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Josephina and Rosa are cousins born on the same day, and both turned 25 today. Their grandfather began putting $7,500 per year into a
Josephina and Rosa are cousins born on the same day, and both turned 25 today. Their grandfather began putting $7,500 per year into a trust fund for Josephina on her 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's trustee) will make 40 more $7,500 payments until a 46th and final payment is made on Josephina's 65th birthday. The grandfather sets things up this way because he wants Josephina to work and not be a "trust fund baby," he also wants to ensure that Josephina is provided for in her old age. Until now, the grandfather has been disappointed with Rosa and has not given her anything. However, they recently reconciled, and the grandfather decided to make an equivalent provision for her. He will make the first payment to a trust for Rosa today, and he has instructed his trustee to make 40 additional equal annual payments until Rosa turns 65, when the 41st and final payment will be made. a. How much money will Josephina have on her 65th birthday after her grandfather deposits $7,500 into her trust fund annually for 46 payments? The interest rate for Josephina is 6%. (4 pts) b. How much will their grandfather need to deposit for Rosa today and each subsequent year to enable her to have the same retirement nest egg as Josephina after the last payment on their 65th birthday for 41 payments? The interest rate for Rosa is 7.5%. c. Identify N, PV, FV, PMT, and I/R for Josephina and Rosa. (2 pts)
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