Must be invested now to allow withdrawals

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Reference no: EM13713295

An amount P must be invested now to allow withdrawals of $1,000 per year for the next 15 years and to permit $300 to be withdrawn starting at the end of year 6 and continuing over the remainder of the 15-year period as the $300 increases by 6% per year thereafter. That is, withdrawal at EOY seven will be $318, $337.08 at EOY eight, and so forth for the remaining years. The interest rate is 12% per year. Hint: Draw a cash-flow diagram.

Reference no: EM13713295

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