Martin wants to provide money in his will for an annual bequest to whichever of his...

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Martin wants to provide money in his will for an annual bequest to whichever of his...

Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provides $1,000 in the first year, and will grow by 7% per year, forever. If the interest rate is 9%, how much must Martin provide to fund his bequest?

a. $50,000

b. $25,000

c. $60,000

d. $40,000

business finance

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Answer 1

Answer #1

Value to fund bequest for this will would be=Value provided in the first year/(Interest rate-Growth rate)

=$1000/(0.09-0.07)

which is equal to

=$50,000

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Answer 2

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