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
Added by Brendan C.
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9% annual return. Given: Annual payment = $200,000 Annual return = 3.9% Using the formula for perpetuity: \[ \text{Principal} = \frac{\text{Annual payment}}{\text{Annual return}} \] \[ \text{Principal} = \frac{200,000}{0.039} \] ** Show more…
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