You want to establish a trust fund that will provide $330,000 a year forever for your heirs. If the fund can earn a guaranteed rate of return of 15 percent, how much must you deposit in a lump sum to establish this trust? This will be the only deposit you make to the fund.

You want to establish a trust fund that will provide $330,000 a year forever for your heirs. If the fund can earn a guaranteed rate of return of 15 percent, how much must you deposit in a lump sum to establish this trust? This will be the only deposit you make to the fund.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 22E

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Concept explainers

Reasons for Estate Planning

Planning is a process that helps decide in advance about future activities and operations. Planning helps to draft the procedures by identifying, analyzing, and designing how to work, when to work, by whom should be done, and what has to be done. It is the primary step followed by a person, business organizations, institutions, companies, etc.

Question

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Perpetuity Trust Fund
You want to establish a trust fund that will provide $330,000 a year forever for your heirs. If the fund can earn a guaranteed rate of return of 15 percent, how much
must you deposit in a lump sum to establish this trust? This will be the only deposit you make to the fund.
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