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# A rich aunt has promised you \$5000 one year from today In addition each year after that, she has promised you a payment that is 5% larger than the last payment She will continue to show this

A rich aunt has promised you \$5000 one year from today. In addition, each year after that, she has promised you a payment that is 5% larger than the last payment. She will continue to show this generosity for 20 years, giving a total of 20 payments. If the interest rate is 5%, what is her promise worth today?

Supplementary question to exercise 5: Answer in the exercise is 95.238,10 kr. Assume the rich aunt deposits this amount into a bank account at t=0. Show that there will be exactly enough money on the bank account the next 20 years to fulfil the promise. Hint: Template for the calculations is illustrated in the solution document for week 39.

Aug 17 2020 View more View Less