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dimulka [17.4K]
1 year ago
5

your grandparents would like to establish a trust fund that will pay you and your heirs $115,000 per year forever with the first

payment one year from today. if the trust fund earns an annual return of 2.2 percent, how much must your grandparents deposit today?
Business
1 answer:
Mademuasel [1]1 year ago
4 0

They must deposit $5,227,272.73 if the trust fund will pay $115,000 per year and the trust fund earns an annual return of 2.2%.

The amount to be deposited today can be considered as the present value that can be described as the current figure of a future sum of money or stream of cash flows provided a specified rate of return.

The amount to be deposited or in other words, the present value can be calculated by using the formula for present value;

PV = Annual cash flow / Interest rate

Substituting the given values of annual cash flow and interest rate in this formula;

PV = $115,000 / 0.022

PV = $5,227,272.73

Therefore, the amount that has to be deposited today by them is calculated to be $5,227,272.73

To learn more about the present value; click here:

brainly.com/question/20813161

#SPJ4

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