Steve and Ed are cousins who were both born on the same day, and both turned 25 today.
Their grandfather began putting $2,500 per year into a trust fund for Steve on his 20th
birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's
trustee) will make 40 more $2,500 payments until a 46th and final payment is made on
Steve's 65th birthday. The grandfather set things up this way because he wants Steve to
work, not 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 today, and he has instructed
his trustee to make 40 additional equal annual payments until Ed turns 65, when the 41st and
final payment will be made. If both trusts earn an annual return of 8%, how much must the