Susan and Jeff each makes deposits of 100 at the end of each year for 40...

 

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Susan and Jeff each makes deposits of 100 at the end of each year for 40 years. Starting at the end of th 41st year, Susan makes annual withdrawals of X for 15 years and Jeff makes annual withdrawals of Y for 1 years. Both funds have a balance of zero after the last withdrawal. a) Susan's fund (both deposit and withdrawal) earns interest at an annual effective rate of 8% and Jeff's fund (both deposit and withdrawal) earns interest at an annual effective rate of 10%. Calculate Y-X. Solution: Susan: 100S401 Xa151 at 8% X = 25,905.65 8.55947 = 3, 026.55 %3D Jeff: 100S401 =Ya15] at 10% Y = 44,259.26 7.606 = 5815.93 %3D Y-X=2792.38 b) Susan's deposit fund earns interest at an annual effective rate of 8% for the first 10 years and 4% thereafter, Jeff's deposit fund earns interest at an annual effective rate of 10% for the first 10 years and 6% thereafter where both their withdrawals happen at an annual effective interest rate of 5%. Calculate Y-X. (Hint: Recall the AV for varying interest rate) Susan and Jeff each makes deposits of 100 at the end of each year for 40 years. Starting at the end of th 41st year, Susan makes annual withdrawals of X for 15 years and Jeff makes annual withdrawals of Y for 1 years. Both funds have a balance of zero after the last withdrawal. a) Susan's fund (both deposit and withdrawal) earns interest at an annual effective rate of 8% and Jeff's fund (both deposit and withdrawal) earns interest at an annual effective rate of 10%. Calculate Y-X. Solution: Susan: 100S401 Xa151 at 8% X = 25,905.65 8.55947 = 3, 026.55 %3D Jeff: 100S401 =Ya15] at 10% Y = 44,259.26 7.606 = 5815.93 %3D Y-X=2792.38 b) Susan's deposit fund earns interest at an annual effective rate of 8% for the first 10 years and 4% thereafter, Jeff's deposit fund earns interest at an annual effective rate of 10% for the first 10 years and 6% thereafter where both their withdrawals happen at an annual effective interest rate of 5%. Calculate Y-X. (Hint: Recall the AV for varying interest rate)

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Solution Given Data FV of the deposits is p 11r Susa... View the full answer