question archive Your great grandfather established a family trust 25 years ago
Your great grandfather established a family trust 25 years ago
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Your great grandfather established a family trust 25 years ago. The trust has, ever since its creation, earned 10.7% per annum (effective annual rate) and pays $47,000 each year-end to family descendants. This will continue in perpetuity. The amount of funds invested by your great grandfather was (to the nearest whole dollar; do not include $ sign or commas): Answer:
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As it is a case of perpetuity, 47000 will be received each year forever
And trust has earned every year 10.7%
So the Amount of funds invested by grandfather was = Present value of perpetuity
Present value of perpetuity = Annual income/ rate = 47000/10.7% = 439252.34 = 439252
Answer : 439252
