On Chris’ 8th birthday, his great aunt gives him $200,000. His parents place the money in an investment paying 7% compounded monthly. a) Find the value of the fund on Chris’ 21st birthday. b) Find the amount of interest the fund earned.
On Chris’ 8th birthday, his great aunt gives him $200,000. His parents place the money in an investment paying 7% compounded monthly. a) Find the value of the fund on Chris’ 21st birthday. b) Find the amount of interest the fund earned.
Chapter27: The Federal Gift And Estate Taxes
Section: Chapter Questions
Problem 5BCRQ
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Question
On Chris’ 8th birthday, his great aunt gives him $200,000. His parents place the money in an investment paying 7% compounded monthly.
a) Find the value of the fund on Chris’ 21st birthday.
b) Find the amount of interest the fund earned.
Expert Solution
Introduction
Future value can be defined as the value at some future point of time. It is calculated by compounding the present value using the required rate and the number of years. Its formula can be expressed as follows:
Future value = Present value X (1 + rate)^ number of years
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