A Ponzi scheme is a fraudulent investment operation in which returns to investors are paid from funds collected from new investors rather than from profit earned by the operator. The scheme takes its name from the notorious operation of Charles Ponzi in 1920. The case of Bernie Madoff is a more recent example.† Suppose the operator of a Ponzi scheme pays an initial return to investors of $18,000. Each month, he must recruit enough new investors to increase the return by 4%. (a) Find a formula that gives the return R, in dollars, that the operator must pay after t months. R(t) = Correct: Your answer is correct. (b) How much must the operator pay to investors at the end of 3 years? (Round your answer to two decimal places.) $ 73870.79 Correct: Your answer is correct. (c) Assume that new investors pay $2000 to join the scheme. How many new investors must be recruited at the end of 3 years in order to pay the existing investors? (Enter a whole number of new investors.) new investor
(a) - R(t) ==18,000 x 1.04^t
(b) - R(3) ==18,000 x 1.04^(3*12)
==18,000 x 1.04^36
==18,000 x 4.10393255
==$73,870.79 - amount that he must raise after 3 years.
(c) - $73,870.79 / $2,000 ==~37 - new investors that he must find.