Question

Answer Question 26 (3 points) A grandfather tells his grandson that he has created a trust fund for him. The terms of the trust are as follows: $9,800 per year for 30 years. The money will be invested in an account that pays 4% annual interest. The payments will start 15 years from today. How much money does the grandfather need to endow the trust with today to fund all the payments? Format $12,345 as 12345 Your Answer: Answer Question 27 (3 points) Derek will deposit $0.5 million per year for 15 years into an account that earns 9%. The first deposit is made next year (12 months from today). Derek has $5.0 million in the account today. How much will be in the account 15 years from today, in miltions? Format $1.23 million as 1.23 Your Answer: Answer Question 28 (3 points .An investor can purchase a small business today for $306,700 The investor plans on holding the business for three years, and wants a 18,00X annual return on his İnvestment He feels he

Answer 1

Answer for Question 26

First convert your Financial Calculator to BGN Mode ( BGN Mode stands for Begining. BGN Mode because the Question says 15 Years from Today, we assume that Today means start of the year and not end of the year )

For this reason we convert the Calculator mode to BGN Mode from END mode

Steps to Convert

Press 2nd PMT ( it will Display END)

Again Press 2nd ENTER ( it will display BGN mode )

Now your Calculator is on BGN Mode

We need the Present value at begining of 30 Years from which we can withdraw Rs 9800 for 30 Years.

Formula is

PMT = 9800 enter

I/Y = 4 enter

N = 30 enter

CPT PV = 176240

Do not change the mode of the calculator

The PV found above is the Future Value after 15 Years

Therefore

FV = 176240 enter

I/Y = 4 enter

N = 15 enter

CPT PV

The Answer will be $ 97859.82

This means that if the Grandfather deposits or endows $ 97859.82 today with the Trust. After 15 years his amount will mature at a value of $176240

$176240 can be withdrawn by the amount of $9800 for 30 years.