The ABC Company has contracted to make the following payments: 500,000 immediately; 50,000 at the end of year 1; 75,000 at the end of year 2; 100,000 at the end of year 3; 125,000 at the end of year 4; 150,000 at the end of year 5. What fixed amount of money should the company plan to set aside each year, at 8% interest per year, compounded annually, in order to make the above payments?
The ABC Company has contracted to make the following payments: 500,000 immediately; 50,000 at the end of year 1; 75,000 at the end of year 2; 100,000 at the end of year 3; 125,000 at the end of year 4; 150,000 at the end of year 5. What fixed amount of money should the company plan to set aside each year, at 8% interest per year, compounded annually, in order to make the above payments?
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
Problem 1PS
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The ABC Company has contracted to make the following payments: 500,000 immediately; 50,000 at
the end of year 1; 75,000 at the end of year 2; 100,000 at the end of year 3; 125,000 at the end of
year 4; 150,000 at the end of year 5. What fixed amount of money should the company plan to set
aside each year, at 8% interest per year, compounded annually, in order to make the above
payments? Draw cash flow diagram.
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