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- Homework Statement
- A person sets up a fund of 3,000,000 dollars which is to pay out a certain amount every year in the future, the first time in three years. The fund has a yield of 4.5% per year. How big can the annual payments be?

- Relevant Equations
- Convergance of a geometric series: ##S_n = \frac {a_1}{1-k}##, where k is the quotient , a_1 is the first term.

Sum of a geometric series: ## S_n = a_1 \cdot \frac{k^{n}-1}{k-1}##

The correct answer given in the textbook is 147,423 dollars

I have tried inserting 0.955 in the above formula for the sum of a geometric series and setting it equal to 3,000,000 (S_n) with n =3. This did not work out well

My second attempt was, considering that the payment is paid every year in the future, to use the convergence formula. There k = 0.955 and S_n = 3,000,000, this gives me the wrong answer of 135,000 dollars annual payment...

What does "first time in three years" imply? And how is it connected to the geometric series formula?

My second attempt was, considering that the payment is paid every year in the future, to use the convergence formula. There k = 0.955 and S_n = 3,000,000, this gives me the wrong answer of 135,000 dollars annual payment...

What does "first time in three years" imply? And how is it connected to the geometric series formula?

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