Steve and Ed Are Cousins Who Were Both Born on the Same

question 51

Multiple Choice

Steve and Ed are cousins who were both born on the same day, and both turned 25 today. Their grandfather began putting $2,500 per year into a trust fund for Steve on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's trustee) Until now, the grandfather has been disappointed with Ed, hence has not given him anything. However, they recently reconciled, and the grandfather decided to make an equivalent provision for Ed. He will make the first payment to a trust for Ed today, and he has instructed his trustee to make 40 additional equal annual payments until Ed turns 65, when the 41st and final payment will be made. If both trusts earn an annual return of 8%, how much must the grandfather put into Ed's trust today and each subsequent year to enable him to have the same retirement nest egg as Steve after the last payment is made on their 65th birthday?

• A) $3,726
• B) $3,912
• C) $4,107
• D) $4,313
• E) $4,528

---

Definitions:

Corporate Strategy

The overall direction and scope of a company, involving the determination of how to achieve long-term goals and sustain competitive advantage.

Human Capital Perspective

Viewing employees as assets whose value can be enhanced through investment in education, training, and health improvements.

Invest

Putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

Resources-Based View

A strategic framework that emphasizes the importance of internal capabilities and resources in gaining competitive advantage.