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Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each year for ...

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Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each year for ...

Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each year for the next 17 years and then use the accumulated funds to purchase a 20 year annuity making end-of-month payments.

a) Assume that her RRSP earns 8.75% compounded annually for the next 17 years, and the fund from which the annuity is paid will earn 5.4% compounded monthly. What monthly payments will she receive?
b) If the average annual rate of inflation for the next 17 years is 2%, what will be the purchasing power in today's dollars of the monthly payments 17 years from now?

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Business Mathematics in Canada

Edition: 11^th

Authors: Jerome, Worswick

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