3. The National Dodgy Mutual (NDM) is a large general insurance company which has, inexplicably, found...
3. The National Dodgy Mutual (NDM) is a large general insurance company which has, inexplicably, found itself in serious financial difficulty. In January, the company purchased a subsidiary, Crooks R Us Insurance (CRU), and pumped in $300 million. In February, NDM's accountants allowed it to pump in 96% of what it provided in January. In March, it was allowed to pump in 96% of what it provided in February, and so on. (a) Assuming NDM keeps paying money to CRU forever, write down an expression for the total amount paid to CRU. [2 marks] (b) Sum the series in (a) to determine NDM's predicted total outlays. If NDM has an initial capital base of $3 billion, will there be anything left for the creditors? [2 marks]