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A. Draw the cash flow diagram. B. How much did the boy receive as a single payment? C. How much did the grandfather deposit?

A. Draw the cash flow diagram. B. How much did the boy receive as a single payment? C. How much did the grandfather deposit?

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 3CQQ
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2 On the day his grandson was born, a man deposited a sufficient amount of money to a trust company so that the boy could receive five annual payments of P10,000 each for his college tuition fees, starting on his 18th birthday. Interest rate at 12% per annum was to be paid on all amounts on deposit. There was also a provision that the grandson could elect to withdraw no annual payments and receive a single lump amount on his 25th birthday. A. Draw the cash flow diagram. B. How much did the boy receive as a single payment? C. How much did the grandfather deposit?
Transcribed Image Text:2 On the day his grandson was born, a man deposited a sufficient amount of money to a trust company so that the boy could receive five annual payments of P10,000 each for his college tuition fees, starting on his 18th birthday. Interest rate at 12% per annum was to be paid on all amounts on deposit. There was also a provision that the grandson could elect to withdraw no annual payments and receive a single lump amount on his 25th birthday. A. Draw the cash flow diagram. B. How much did the boy receive as a single payment? C. How much did the grandfather deposit?
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