Problem 5-31

Required lump sum payment

Starting next year, you will need $25,000 annually for 4 years to complete your education. (One year from today you will withdraw the first $25,000.) Your uncle deposits an amount today in a bank paying 7% annual interest, which will provide the needed $25,000 payments.

How large must the deposit be? Round your answer to the nearest cent. $ ________

How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent. $ ________