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The directors of a company have voted to establish a fund that will pay a retiring accountant or his estate $1,000 per month for the next 10 years, with the first payment to be made a month from now. How much should be placed in the fund if it earns interest at 7 percent compounded monthly? How much interest will the fund earn during its existence?

 Nov 20, 2020
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PV=0; P=1000; R=0.07/12; N=10*12;    P*(((1 + R)^N - 1)*((1 + R)^-N)* R^-1)
PV =$ 86,126.35 Amount deposited.

 

Interest earned=[1000 x 120] - $86,126.35 =$33,873.65 interest earned on the fund.

 Nov 20, 2020
edited by Guest  Nov 20, 2020

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