Angela has a trust fund that will mature in three years with a value of $15,000. If this trust fund is earning a 5% rate of return annually, what is the value of this trust fund in today’s dollars (i.e., the trust fund’s present value)

Angela has a trust fund that will mature in three years with a value of $15,000. If this trust fund is earning a 5% rate of return annually, what is the value of this trust fund in today’s dollars (i.e., the trust fund’s present value)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 12EB: Your friend has a trust fund that will pay her the following amounts at the given interest rate for...

See similar textbooks

Related questions

Q: Your parents invest $10,000 in a college fund when you are born. They find a fund that will return…

A: Initial investment (P) = $10000 Interest rate (r) = 8% Fund duration (n) = 18 years Let the tuition…

Q: Your younger sister, Brittany, will start college in five years. She has just informed your parents…

A: given, A = $30,000 r=10% n = 4 years

Q: Ms. Cristiana Piccini is valuing an investment that pays her $27,000 per year for the first ten…

A: Calculation of Value of Investment: Excel Spreadsheet:

Q: Mr. Wise is creating a college investment fund for his daughter. He will put in P850 per year for…

A: To open the "FV function" window - MS-Excel --> Formulas --> Financials --> FV.

Q: You are planning to buy your dream mansion and for that you have decided to make 3 independent…

A: Annuity means finite no. of payments which are same in size and made in equal intervals for a time.…

Q: Arona would like to receive $15,820 each year for the next 5 years, starting today. Then she hopes…

A: Since payment is due today or at the beginning of the year, this is annuity due problem. For…

Q: An engineer received a bonus of $12,000 that he will invest now. He wants to calculate the…

A: Compute the down payment.

Q: Your grandfather placed $5,000 in a trust fund for you. In 12 years what will be the worth of the…

A: Solution:- When an amount is invested, it earns interest. The amount initially invested is called…

Q: . How much should you deposit monthly to accumulate $85,000 in 15 years?

A: Future Value of Annuity: It represents the future worth of current annuity payments made…

Q: How much money should Prisha invest today in a fund that earns interest at 4.02% compounded…

A: Here, Semi Annual Payment (PMT) is $7,750 Interest Rate (r) is 4.02% Compounding Period (m) is…

Q: Mohammed estimate that he will need RO 10,000 in 5 years to fund his university education. How much…

A: Compound interest is referred as the in interest calculated on principal along with all accumulated…

Q: Your grandparents would like to establish a trust fund that would pay annual payments to you and…

A: In the given question we need to compute the present value of perpetuity because we will receive…

Q: You are saving for the college education of your two children. One child will enter college in 5…

A: Present value of annuity formula along with future value of annuity formula is used to calculated…

Q: You have just celebrated your birthday. Your uncle, has set up a trust fund for you, which will pay…

A: Present value: It can be defined as today’s worth of an investment that will be received in the…

Q: Brenda expects to receives Sh.50,000 at the end of each year for 5 years in a fund earning 10% per…

A: The present value of an annuity is a series of payments or receipts lasting for some specific…

Q: If you put $10,000 into an investment to fund your child's college education in 18 years, how much…

A: Generally, investment is done by individuals order to have sufficient money available for future…

Q: hat do you think the future worth of her investment will be? b. How much interest will she earn?

A: Interest: Interest is the income generated from investing an amount in a bank or any other financial…

Q: You have your own practice as a trusts and estates attorney anda dient has sought your assistance…

A: “Since you have asked multiple questions, we will solve the one question for you. If you want any…

Q: If Joe has $1,000 and invests it into a mutual fund that returns 10%, what willI be his Future Value…

A: Future value = Present value*(1+rate)^no of years

Q: Donald will receive $450,000 from his trust fund in 20 years from today. He assumes he could get a…

Q: Holly wants to have $250,000 to send a recently born child to college. She sets up a 529 plan and…

A: Future value (FV) = $ 250,000 Annual interest rate (R) = 6% Number of annual investment (N) = 17…

Q: Your parents would like to establish a trust fund that would pay annual payments to you and your…

A: In this question we require to calculate the present value of perpetuity as we will receive $500000…

Q: Sarah Wiggum would like to make a single investment and have $2.0 million at the time of her…

A: Let the single investment today = P Future value needed = $2 million n = 35 years r = 4%

Q: Mr. Bates is creating a college investment fund for his daughter. He will putin $850 at the end of…

A: The question is based on the concept of calculation of future value of period fix payment, which is…

Q: Your newborn daughter has received a total of 8,000 in cash from various friends and relatives. If…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: Jasica Parker would like to have $48,000 to buy a new car in 7 years. To accumulate $48,000 in 7…

A: The monthly invested payment can be calculated using PMT function in excel PMT(rate, nper, pv, [fv],…

Q: Sarah Wiggum would like to make a single investment and have $2.0million at the time of her…

A: Amount required in 35 years or future value (FV) = $2,000,000 Period (p) = 35 years Rate of return…

Q: Your brother, who is 6 years old just received a trust fund that will be worth $25,000 when he is 21…

A: For this we will need to calculate the present value of the fund. using present value = future value…

Q: How much does your client need to contribute to a fund each month for the next 25 years (first…

A: Annuity refers to an amount or stream of equal cash flows (CF) paid or received periodically.…

Q: You are planning to buy your dream mansion and for that you have decided to make 3 independent…

A: The question can be solved as follows:

Q: Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it…

A: Time value of money: Time value of money is a vital concept to the investors, as it suggests them…

Q: receiving 25,000.00 pesos from his grandfather yearly and has decided to invest it next year to a…

A: The present value is value without interest and future value is value with interest. Can be found…

Q: Heather needs to invest to help with her child's college fund. How much would she have to invest to…

A: Money’s value declines with the time. Discounting is a way which is used to get the PV of future…

Q: Consider the following independent situations. a. Mike Finley wishes to become a millionaire. His…

A: a. Future value factor = Future value / Initial fund = $1,000,000 / $92,296 = 10.83471 Find the…

Q: You want to create a college fund for a child who is now 3 years old. The fund should grow to…

A: given data future value = 60,000 time period = 15 years interest rate = 6% discounting to find…

Q: Jane has been given an opportunity to receive 20,000, six years from now. If she can earn 10% on her…

A: Present value is the current value of a future cash flow discounted to the present terms at a…

Q: Walt is evaluating an investment that will provide the following cash flows at the end of each of…

A: A concept that implies the future worth of the money is lower than its current value due to several…

Q: Having received a large inheritance, Jing-mei's parents wish to establish a trust for her college…

A: Future Value =$120,000 N = 7

Q: What is the rate of return on the trust fund?

A: Interest charged on the principal amount and the interest accrued is known as Compound Interest. It…

Q: Richard wants to ensure that at least some of his descendants are well educated in perpetuity. He is…

A: The present value of a lump sum: The present value of a lump sum (single) investment made at a…

Q: Mr. Blochirt is creating a college investment fund for his daughter. He will put in $850 per year…

A: The future value of the annuity is the future worth of a cash flow series at a certain rate of…

Q: Clarissa wants to fund a growing perpetuity that will pay $10,000 per year to a local museum,…

A: Present value of the growing perpetuity is the amount she needs to fund today This can be calculated…

Q: Your friend already has $20,000 in an investment account. In addition to this amount, she is…

A: Given Information: Amount in investment account - $20,000 Additional amount invested at the end of…

Q: A man invests P10,000 now for the college education of his 2-year old son. If the fund earns 14%…

A: We can define effective interest rate as that rate which has been adjusted for the effect of…

Q: Suppose you want to use this fund to buy a $279,000 houseboat when you retire in 40 years. How much…

A: Future Value = $279,000 Interest Rate = 4.75% Time Period = 40 Years

Q: Your friend Anne is planning to invest $400 each year for four years and will earn a rate of 6…

A: Given information: Annuity payment : $400 Rate of interest : 6% Time period : 4 years Since, the…

Question

Angela has a trust fund that will mature in three years with a value of $15,000. If this trust fund is earning a 5% rate of return annually, what is the value of this trust fund in today’s dollars (i.e., the trust fund’s present value)?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friends trust fund payments. For further instructions on present value in Excel, see Appendix C.
Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friends trust fund payments. For further instructions on future value in Excel, see Appendix C.
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
Your grandparents would ilke to establish a trust fund that will pay you and your heirs $125,000 per year forever with the first payment 10 years from today. If the trust fund earns an annual return of 2.4 percent, how much must your grandparents deposit today?
Donald will receive $450,000 from his trust fund in 20 years from today. He assumes he could get a return of 6% on his own until then. How much is his trust fund payment worth in today's dollars?
Your godmother put $2,000 in a trust fund for you. In 10 years the fund will be worth $5,000. What is the rate of return on the trust fund?
Next year, you will begin receiving $173 per year in perpetuity from a family trust fund (first payment is exactly 1 year from today). You have decided to discount these cash flows at a constant interest rate of 5.8%. What is the present value today of these future cash flows?
Your rich uncle has offered you two living trust payouts for the rest of yourlife. The positive cash flows of each trust are shown below. If your personalMARR is 10% per year, which trust should you select? Note: At 10% per year interest, infinity occurs when N = 80 years.
Your parents would like to establish a trust fund that would pay annual payments to you and your heirs of $500,000 a year forever. How much do your parents need to deposit into this trust fund today to achieve their goal if the fund can earn 7% interest?
Your parents placed $240,000 in a trust fund for you. In 15 years, what will be the worth of the savings. If the estimated rate of return on the trust fund is 10%?<
Your grandparents would like to establish a trust fund that would pay annual payments to you and your heirs of $250,000 a year forever. How much do your parents need to deposit into this trust fund today to achieve their goal if the fund can earn 10% interest?
Mary is going to receive a 31-year annuity of $8,600 per year. Nancy is going to receive a perpetuity of $8,600 per year. If the appropriate interest rate is 9 percent, how much more is Nancy’s cash flow worth?