A wealthy industrialist wishes to establish a $2,000,000 trust fund in 18 years from now

which will provide equal yearly income for his grandchild after her graduation till infinity. The

grandchild may only receive the interest earned from the established trust, the principal will

remain unusable. If the interest rate earned on the trust is expected to be 7 percent in all future

periods,

Required:

a) How much income (cash flows) will the grandchild receive each year?

b) In order to make this trust fund of $2,000,000 in 18 year, what lump-sum amount the

grandfather must deposit today?

Answer rating: 100% (QA)

a To calculate the annual income for the grandchild you can use the formula for the p... View the full answer