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?

---

Definitions:

Employee Leasing

A staffing strategy where companies contract with a third-party to hire and manage their workforce, often to reduce administrative responsibilities.

Professional Employer Organization

A firm that provides a service under which an employer can outsource employee management tasks, such as benefits administration, payroll, and workers' compensation.

Knowledge Worker

An individual whose primary job involves processing and working with information or knowledge, rather than manual labor.

Fertilizer

A chemical or natural substance added to soil or land to increase its fertility and enhance plant growth.