Joseph has just retired and is trying to decide between two retirement income option as to where he would place his life savings. Fund A will pay him quarterly payments for 25years starting at $1000 at the end of the first quarter. Fund A will increase his payments each quarter thereafter by $200 and the last payment will be $20800.
Fund B will pay $1000 at the end of the first quarter and the payments will increase at a constant rate of 18% p.a, compounding quarterly thereafter.
How much will be available in each fund at the end of 25 years if Joseph’s required interest rate is 12% p.a compounded quarterly?