Your grandparents would like to establish a trust fund that will pay you and your heirs \$170,000 per year forever with the first payment one year from today. W the trust fund earns an annual return of 3.3 percent, how much must your grandparents deposit today?
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Step 1: Recognize this is a perpetuity with the first payment one year from today, so the present value formula is PV = C / r, where C is the annual payment and r is the annual interest rate. Show more…
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