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Julian and Jonathan Are Twin Brothers (And So Were Born

question 103

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Julian and Jonathan are twin brothers (and so were born on the same day) .Today, both turned 25.Their grandfather began putting $2,500 per year into a trust fund for Julian on his 20th birthday, and he just made a 6th payment into the fund.The grandfather (or his estate's trustee) will make 40 more $2,500 payments until a 46th and final payment is made on Julian's 65th birthday.The grandfather set things up this way because he wants Julian to work, not be a "trust fund baby," but he also wants to ensure that Julian is provided for in his old age. Until now, the grandfather has been disappointed with Jonathan and so has not given him anything.However, they recently reconciled, and the grandfather decided to make an equivalent provision for Jonathan.He will make the first payment to a trust for Jonathan today, and he has instructed his trustee to make 40 additional equal annual payments until Jonathan 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 Jonathan's trust today and each subsequent year to enable him to have the same retirement nest egg as Julian after the last payment is made on their 65th birthday?


Definitions:

Condorcet Paradox

A situation in social choice theory where collective preferences can be cyclic (i.e., not transitive), even if the individual preferences within the group are rational and transitive. It highlights the complexity of voting systems and decision making.

Individual Preferences

The personal likes or dislikes of an individual, which influence their decisions and behavior.

Social Preferences

Social Preferences indicate how individuals’ decision-making is influenced by the welfare of others, beyond self-interest.

Transitivity

In decision theory, the principle that if option A is preferred over B, and B is preferred over C, then A should be preferred over C.

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