Concept explainers
Trust Fund. Ted and Edith Markey have a new grandchild, Kurt, and want to create a trust a trust fund for him that will yield $1,000,000 on his 22nd birthday.
a. What lump sum should they deposit now at 4.2%, compounded continuously, to achieve $1,000,000?
b. The amount in part (a) is more than they can afford, so they decide to invest a constant amount,
such that the accumulated future value of the continuous money stream is $1,000,000, assuming an interest rate of 4.2%, compounded continuously.
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