You wish to leave an endowment for your heirs that goes into effect 50 years fro
ID: 2778578 • Letter: Y
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. What amount would you like spent 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 compoun 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. What amount would you like spent 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 compounExplanation / Answer
Answer-1: We would like to spend $10000 to fund this grand party.
Answer-2: Calculation of money you have to leave to your heirs:
Yearly amount = $10000
Time = forever (Perpetuity)
Interest rate = 6%
Value of the perpetuity = Yearly Amount / Interest rate
= $10000 / 6%
= $166,666.67
Answer-3:
Calculation of yearly investment for funding the required amount at the end of 50 years from now:
Future value required = $166,666.67
Time = 50 years
Interest rate = 6%
Future value annuity factor (6%, 50 years) = 290.3359
Annual Amount to be invested = $166,666.67 / 290.3359 = $574.05
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