4-85: Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he saved $2000. For the next 5 years, he expects his salary to increase at an 6% annual rate, and he plans increase his savings at the same 6% annual rate. He invests his money in the stock market. Thus, there will be six end-of-year investments (the initial $2000 plus five more). Solve the problem using the geometric gradient factor. How much will the investments be worth at the end of 6 years if they increase in the stock market at a 7% annual rate?

4-85: Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he saved $2000. For the next 5 years, he expects his salary to increase at an 6% annual rate, and he plans increase his savings at the same 6% annual rate. He invests his money in the stock market. Thus, there will be six end-of-year investments (the initial $2000 plus five more). Solve the problem using the geometric gradient factor. How much will the investments be worth at the end of 6 years if they increase in the stock market at a 7% annual rate?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

4-85: Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he saved
$2000. For the next 5 years, he expects his salary to increase at an 6% annual rate, and he plans to
increase his savings at the same 6% annual rate. He invests his money in the stock market. Thus, there will
be six end-of-year investments (the initial $2000 plus five more). Solve the problem using the geometric
gradient factor. How much will the investments be worth at the end of 6 years if they increase in the stock
market at a 7% annual rate?

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