François and Pat Wish to Structure the Payments from a 20-Year

question 9

Short Answer

François and Pat wish to structure the payments from a 20-year annuity so that the end-of-quarter payments increase by $500 every five years. Maritime Insurance Co. will pay 5% compounded quarterly on funds received to purchase such an annuity. How much must François and Pat pay for an annuity in which the quarterly payments increase from $2,000 to $2,500 to $3,000 to $3,500 in successive five-year periods?

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