You have just turned 25 and may now spend a portion of the trust fund your parents established for you. The terms of the trust fund allow you to withdraw 60 beginning-of-the-year cash flows of 100,000 each.
An investment firm has offered to pay you cash for all of the fund today. If the rate they use to discount the cash flows is 16 per year, what is their offer price today for your pension fund?
A) 4,605,750,853
B) 6,000,000.00
C) 624,915.20
D) 724,901.63
Question 2
You are saving for your child's university education. It is her 1st birthday today. She will start university just after her 19th birthday. You are going to save 2,000 per year each year starting today and ending on her 18th birthday.
If you expect to earn a rate of 5 in the savings account, then how much will you have saved by her 19th birthday?
A) 56,264.77
B) 59,078.01
C) 61,078.01
D) 64,131,91
E) 54,264.77
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