Question

A man stipulates in his will that $50,000 from his estate is to be placed in a fund from which his three daughters are each to receive the same amount when aged 21. When the man dies the girls are aged 19, 15 and 13. How much will each receive, if the fund earns interest at 12% compounded half yearly.

Answer 1

Half yearly interest amount = 12%/2 = 6%

Let the amount received by each daughter be X

The present value of all 3 amounts added together should be equal to 50,000

X/(1.06)^4 + X/(1.06)^12 + X/(1.06)16 = 50,000

0.792093x + 0.496969X + 0.393646x = 50,000

1.6827086x = 50,000

X = $29,714

Hence, each daughter will receive $29,714