Steve and Ed are cousins who were both born on the same day. Both turned26today. Their grandfather began putting $2,700per year into a trust fund for Steve on his 20th birthday, and he just made aseventhpayment into the fund. The grandfather (or his estate’s trustee) will continue with these $2,700payments until a51stand final payment is made on Steve’s70thbirthday. The grandfather set things up this way because he wants Steve to work, not to be a “trust fund baby,” but he also wants to ensure that Steve is provided for in his old age.
Until now, the grandfather has been disappointed with Ed, hence has not given him anything. However, they recently reconciled, and the grandfather decided to make an equivalent provision for Ed. He will make the first payment to a trust for Ed later today, and he has instructed his trustee to make additional equal annual payments each year until Ed turns70, when the45thand final payment will be made. If both trusts earn an annual return of9%, how much must the grandfather put into Ed’s trust today and each subsequent year to enable him to have the same retirement nest egg as Steve after the last payment is made on their70thbirthday?
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$4,026
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$4,312
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$4,567
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$4,713
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