An eighteen year old receives an annuity on her birthday


1. An eighteen year old receives an annuity on her birthday from her great uncle's estate paying 3,000 on her nineteenth birthday and subsequent payments that increase by $500 per year until age thirty-five. Find the value of the annuity on her eighteenth birthday assuming an interest rate of 7.25% compounded monthly.

(A) 53,352 (B) 55,241 (C) 58,071 (D) 59,299 (E) 62,789

2. Perpetuity has a payment of 10 starting today, 10+X in one year, 10+2X in two years, 10+3X in three years, and so on. Assuming an effective annual rate of 6%, the perpetuity can be purchased for 3,000. Find X to the nearest dollar.

(A) 8 (B) 9 (C) 10 (D) 11 (E) 12

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Financial Management: An eighteen year old receives an annuity on her birthday
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