Millionnaire left the majority of this estate to fund five prizes, each to be awarded annually in perpetuity starting on year after he died. If he wanted the cash award of each of the five prizes to be $52,000 and his estate could earn 10% per year, how much would he need to fund his prizes? Formula: PV = c / r PV = 52,000 / .10 PV = 520,000 If he wanted the value of each prize to grow by 5% per year (to keep up with the inflation), how much would he need to leave? Assume that the first amount was still $52,000. Formula: PVgp = C1 / r - g PV = 52,000 / .10 - .05 Nobel needs to leave 1,040,000 If his heirs decided to invest the amount of money you calculated in (b) at 10% per year, how much would they have in 2020, 124 years after his death? Financial Calculator N = 124 I/Y = 10 PV = 1,040,000 PMT = 0 CPT FV = 1.41164811
Millionnaire left the majority of this estate to fund five prizes, each to be awarded annually in perpetuity starting on year after he died. If he wanted the cash award of each of the five prizes to be $52,000 and his estate could earn 10% per year, how much would he need to fund his prizes? Formula: PV = c / r PV = 52,000 / .10 PV = 520,000 If he wanted the value of each prize to grow by 5% per year (to keep up with the inflation), how much would he need to leave? Assume that the first amount was still $52,000. Formula: PVgp = C1 / r - g PV = 52,000 / .10 - .05 Nobel needs to leave 1,040,000 If his heirs decided to invest the amount of money you calculated in (b) at 10% per year, how much would they have in 2020, 124 years after his death? Financial Calculator N = 124 I/Y = 10 PV = 1,040,000 PMT = 0 CPT FV = 1.41164811
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Millionnaire left the majority of this estate to fund five prizes, each to be awarded annually in perpetuity starting on year after he died.
- If he wanted the cash award of each of the five prizes to be $52,000 and his estate could earn 10% per year, how much would he need to fund his prizes?
- Formula: PV = c / r
- PV = 52,000 / .10
- PV = 520,000
- If he wanted the value of each prize to grow by 5% per year (to keep up with the inflation), how much would he need to leave? Assume that the first amount was still $52,000.
- Formula: PVgp = C1 / r - g
- PV = 52,000 / .10 - .05
- Nobel needs to leave 1,040,000
- If his heirs decided to invest the amount of money you calculated in (b) at 10% per year, how much would they have in 2020, 124 years after his death?
- Financial Calculator
- N = 124
- I/Y = 10
- PV = 1,040,000
- PMT = 0
CPT FV = 1.41164811
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education