Your grandfather is retiring at the end of next year. He would like to ensure that...

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Your grandfather is retiring at the end of next year. He would like to ensure that...

Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $11,900 a year forever, starting when he retires. If he can earn 6.5 percent annually, how much does your grandfather need to invest to produce the desired cash flow?

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Answer 1

Answer #1

This question requires application of PV of perpetuity formula, according to which

PV = $183,706.92 --> Amount grandfather should invest today

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Answer 2

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