When Alfred Nobel died, he left the majority of his estate to fund five prizes, each tobe awarded annually in perpetuity starting one year after he died (the sixth one, ineconomics, was added later).a. If he wanted the cash award of each of the five prizes to be $35,000 and hisestate could eam 8% per year, how much would he need to fund his prizes?b. If he wanted the value of each prize to grow by 5% per year (perhaps to keep upwith inflation), how much would he need to leave? Assume that the first amount wasstill $35,000.c. His heirs were surprised by his will and fought it. If they had been able to keep theamount of money you calculated in(b), and had invested it at 8% per year, how much would they have in 2014, 118years after his death?

Perpetuity is the series of cash flow stream over infinite period of time

Answered: When Alfred Nobel died, he left the…

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

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