Author Question: At the age of 75, Mrs. Walker decided to set up a trust fund for her grandson, which can take care ... (Read 94 times)

erika · **on:** Jun 6, 2019

Question 1

After retirement, Andy plans to buy bonds in a perpetual fund. What amount must Andy place in a perpetual fund today, if it earns 4.8% compounded semi-annually and the first monthly payment of $500 in perpetuity will be made one year from today?
◦ $125 000
◦ $120 396
◦ $119 629
◦ $126 244
◦ $120 873

Question 2

At the age of 75, Mrs. Walker decided to set up a trust fund for her grandson, which can take care of some of his expenses for the rest of his life. She made an initial contribution of $150 000 to set up the trust fund, which would make the first semi-annual payment of perpetuity to her grandson, 5 years from now. If the funds in trust earn 5% compounded annually, what is the maximum payment the trust can make to Mrs. Walker's grandson in perpetuity?
◦ $4727.68
◦ $4844.43
◦ $5746.53
◦ $4613.74
◦ $6033.85

janeli · **Reply #1 on:** Jun 6, 2019

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