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Bezzdna [24]
3 years ago
10

Your grandparents would like to establish a trust fund that will pay you and your heirs $200,000 per year forever with the first

payment one year from today. If the trust fund earns an annual return of 3.9 percent, how much must your grandparents deposit today
Business
1 answer:
lara31 [8.8K]3 years ago
8 0

Answer:

PV= $5,128,205.13

Explanation:

Giving the following information:

Annual cash flow= $200,000

Annual rate of return= 3.9% = 0.039

<u>We need to calculate the present value to be invested to obtain a perpetual annuity of $200,000. To determine the initial investment, we need to use the following formula:</u>

PV= Cf / i

PV= 200,000 / 0.039

PV= $5,128,205.13

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Answer:

See below

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