what is the present value of your trust fund if you have projected that it will...

what is the present value of your trust fund if you have projected that it will provide you with $50,000 9 years from today and it earns 7% compounded annually?

Expert Solution

Here, the cash inflows will be same every year, so it is an annuity. For calculating the present value of annuity, we will use the following formula:

PVA = P * (1 - (1 + r)^-n / r)

where, PVA = Present value of annuity, P is the periodical amount = $50000, r is the rate of interest = 7% and n is the time period = 9

Now, putting these values in the above formula, we get,

PVA = $50000 * (1 - (1 + 7%)^-9 / 7%)

PVA = $50000 * (1 - ( 1+ 0.07)^-9 / 0.07)

PVA = $50000 * (1 - ( 1.07)^-9 / 0.07)

PVA = $50000 * (1 - 0.54393374258) / 0.07)

PVA = $50000 * (0.45606625741 / 0.07)

PVA = $50000* 6.5152322488

PVA = $325761.61

So, present value of trsut fund is $325761.61

jeff jeffy answered 2 years ago

Q2. It is your 6th birthday today. You have a trust fund with $50,000 that is...

Q2. It is your 6th birthday today. You have a trust fund with $50,000 that is earning 8% per year. You expect to withdraw $30,000 per year for 7 years starting on your 22nd birthday for graduate school. How much money will be left in the trust fund after your last withdrawal (rounded to the nearest $10)?

You have received a trust fund currently worth $900,000. However, you cannot access to the fund...

You have received a trust fund currently worth $900,000. However, you cannot access to the fund until you turn 60 years old, which is in 20 years. At that time you will be able to withdraw $10,000 per month. If the trust fund is invested at a 7 percent rate, compounded monthly, how many months will the money last once you start making the monthly withdrawals? **Answer and show work in Excel

You have inherited $1.6 million from your old uncle. What is the present value of this...

You have inherited $1.6 million from your old uncle. What is the present value of this cash flow if you receive it at the following times? 1. Suppose the right discount rate from the market is 3%. (a) Now. (b) In 5 years. (c) In 10 years. (d) In 50 years. 2. Suppose the discount rate now rises to 8%. (a) Now. (b) In 5 years. (c) In 10 years. (d) In 50 years.

You are the beneficiary of a trust fund that will start paying you cash flows in...

You are the beneficiary of a trust fund that will start paying you cash flows in 5 years. The cash flows will be $ 19933 per year and there will be a total of 35 yearly cash flows paid. If the interest rate is 5.5 % per year, what is the value needed in the trust fund now to fund these cash flows?

QUESTION 1 - Present Value – 20 marks You have approached your organisation’s bank for a...

QUESTION 1 - Present Value – 20 marks You have approached your organisation’s bank for a $1,000,000 loan. The bank has advised you that the organization can take a traditional mortgage for 10 years at a fixed rate of 6.5% with monthly payments. What is the monthly payments? What is the APR of this loan? What is the effective interest rate (EAR) of this loan? How much of the first payment is interest? How much of the first payment is...

Time value of money A parent is setting up a trust fund for his daughter which...

Time value of money A parent is setting up a trust fund for his daughter which is expected to be worth GH¢200,000 in ten years when she is ready to marry. Given that the relevant discount rate is 12% per annum, what should be the onetime investment that this parent should make today to achieve his perceived target. Assume monthly compounding. The parent has the alternative of making ten annual contributions into the fund that will grow to GHS 200,000...

Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for...

Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for a new clinical nurse specialist program being established by your healthcare organization. The nurses would provide education while patients are in the hospital and home visits are on a fee-for-service basis after patients have been discharged Should the hospital undertake the program if its required rate of return is 12%? Note: it must be assumed that the revenues and costs in this problem represent...

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that...

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that pays $10,000 per year at the end of the next four years if the appropriate discount rate is 5 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time each year for the next four years? Prove that you earned the same return that you would have, had you put your money in...

Using your Present Value for a Lump Sum, Present Value for an Annuity, Future Value of...

Using your Present Value for a Lump Sum, Present Value for an Annuity, Future Value of a Lump Sum and Future Value of an Annuity, create four separate problems (with solutions) that use each table. Therefore, you need one problem for each table but four problems in total. Please include formulas and explanations where needed. The tables aren't provided because it is however you want to do it (however, it does include the period and interest rate). (i.e) Can be...

Explain what Present Value and Future Value are in you own words. What is the difference...

Explain what Present Value and Future Value are in you own words. What is the difference between the Present Value of $ and the Present Value of an Annuity? What is a perpetuity?

Question