As part of your personal budgeting procedure, you've estimated that at the end of each of the next five years you will incur significant maintenance expenses on your home. You'd like to cover these expenses by depositing the lump sum in an account today that earns 8%. You will gradually draw down this account each year as maintenance bill come due.
End of Year Expense
1 $5,000
2 4,000
3 6,000
4 10,000
5 3,000
a. How much money should you deposit today to cover all of the expenses?
b. What effect does an raise in the interest rate have on amount computed in part (a)? Describe