Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $ 4 comma 000$4,000 in the first year, and will grow by 66 % per year, forever. If the interest rate is 1111 %, how much must Martin provide to fund this bequest?

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Business

Bruce Patterson

30 July, 00:31

Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $ 4 comma 000$4,000 in the first year, and will grow by 66 % per year, forever. If the interest rate is 1111 %, how much must Martin provide to fund this bequest?

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Faith Sanchez · Answer 1

Amount = CF/k - g

where CF = $4000; k = 1111%=11.11; g = 66% = 0.66

= 4000 / (11.11 - 0.66) = $41,800

This is the amount that must be provided to fund the bequest