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An employee's compensation includes an annuity that pays $80,000 at retirement, with each subsequent annual payment growing by 3% for a total of 6 payments overall. The firm's policy is to pre- fund such annuities before retirement. At an interest rate of 4%, how much would the firm need to invest 4 years before retirement?

An employee's compensation includes an annuity that pays $80,000 at retirement, with each subsequent annual payment growing by 3% for a total of 6 payments overall. The firm's policy is to pre- fund such annuities before retirement. At an interest rate of 4%, how much would the firm need to invest 4 years before retirement?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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An employee's compensation includes an annuity that pays $80,000 at retirement, with each subsequent annual payment growing by 3% for a total of 6 payments overall. The firm's policy is to pre- fund such annuities before retirement. At an interest rate of 4%, how much would the firm need to invest 4 years before retirement?
Transcribed Image Text:An employee's compensation includes an annuity that pays $80,000 at retirement, with each subsequent annual payment growing by 3% for a total of 6 payments overall. The firm's policy is to pre- fund such annuities before retirement. At an interest rate of 4%, how much would the firm need to invest 4 years before retirement?
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