Question
Suppose you are given an offer and need to analyze the alternative. The alternative to this investment is an investment that will generate a 6.1%
Suppose you are given an offer and need to analyze the alternative. The alternative to this investment is an investment that will generate a 6.1% annually. Lunas Co. offers $195 next year. For every year after that they will increase the amount, they give you by 2.7% (each year) until the end of 20 years from now.
a. Find the value of Lunas Co.s offer
b. If you replicate this offer by depositing the money you calculated in part (a) in an account, and earning your investment rate (withdrawing each payment right before the end of each year), how much will you have in that account at the end of year 2, and at the end of year 10?
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