You wish to leave an endowment for your heirs that goes into effect 50 years fro

Question

You wish to leave an endowment for your heirs that goes into effect 50 years from today. You don’t want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. You want to spend $3,ooo yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?

Explanation / Answer

Answer:

A = $3000
r = 6% per year compounded monthly, which = .5% interest per month = .005
n = the number of compounding time periods = 600 in 50 years.
Substituting these values into the equation for the future value of an ordinary annuity:

=3000*(1+0.005)600-1)/0.005

=$11361573.25

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.