Funding bill pension with the first annual payment

Assignment Help Financial Management

Reference no: EM131860809

Bill is due to retire in 20 years. His employer is scheduled to begin funding Bill’s pension with the first annual payment due at the end of year one and the last due at the end of year twenty. The first payment into the fund is 2000 and subsequent payments will increase by 3 % per year. These employer contributions will earn an annual effective rate of 7 %. The employer could also select an alternative funding scheme where annual contributions begin at the end of year six with the last contribution again at the end of year twenty. Under this scheme the first payment will be 1000 and will increase by Q each year. Under this scheme the effective interest rate is 8 %. Find Q so that both schemes give the same accumulated value at the end of year 20.

Reference no: EM131860809

Questions Cloud

Number of literary terms : In Chapter 20 of Thank You for Arguing, the author lists a number of literary terms that can seem a bit overwhelming at first.

Review articles on management information systems : Read at least three (3) academically reviewed articles on Management Information Systems and complete the following activities.

Discuss the important performance outcomes : How does one particular leadership model (a valid one, by today's research standards, as discussed in this module's materials) interact with the most important.

What are some of the possible worldview : What is a worldview? Why is it important? What are some of the possible worldview's? How would a worldview influence politics?

Funding bill pension with the first annual payment : Bill is due to retire in 20 years. His employer is scheduled to begin funding Bill’s pension with the first annual payment due at the end of year

Argumentative writing : Convincing a person to view a certain opinion about a certain topic your way, needs to be approached with a certain skill

Still break-even with their cost of capital : What can each buyer pay for the building and still break-even with their cost of capital. What will the building sell for?

Calculate your first annual payment into this account : Calculate your first annual payment into this account. Calculate the last annual payment.

Writing process and the stages of writing : What is the difference between the writing process and the stages of writing?

User Account

All Pages