Isaac LaFleur Industries has an ambitious plan to provide a pension plan for its one trustworthy employee
Question:
Isaac LaFleur Industries has an ambitious plan to provide a pension plan for its one trustworthy employee Patrick March. LaFleur plans to starting saving for March's retirement on 12/31/20 and will save the same amount of money at the end of each year for four years ending at 12/31/23. Once the money is accumulated on that date, LaFleur will place it in a quality investment that will earn 9% annual interest. From that investment LaFleur will pay March $6,000 at the start of every year starting 1/1/25 and continuing four more years to 1/1/29 (total of 5 payments). Answer the following questions:
1. How much money will LaFleur need to have collected at 1/1/24 in order to start paying the pension annuity of $6000 a year earning 9% annual interest rounded to the nearest full dollar?
2. Suppose instead that the amount of money LaFleur sets aside from the savings annuity is $25,000 at 12/31/23 (its not, but just pretend that it is- if I used the real amount I'd give you the answer to #1). So if the amount of money that LaFleur needs to save every year is $5,887 starting 12/31/20 then what interest does this savings account earn annually?
