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19 July, 17:35

Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete wants to have $8,000 available each year for various school and living expenses. Use Exhibit 1-D. If he earns 3 percent on his money, how much must he deposit at the start of his studies to be able to withdraw $8,000 a year for three? (Round PVA factor to 3 decimal places and final answer to the nearest whole dollar.)

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  1. 19 July, 18:19
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    He must deposit $22,200

    Step-by-step explanation:

    Since he wants to have $8,000 at the end of the year. Therefore,

    PV = PMT * PV annuity table factor

    = $8,000 * 2.775 (present value of a series)

    = $22,200 (exhibit 1-D)
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