Q1. In her will, your aunt set a trust which is required to pay you the sum of $5,000 a year forever with payments starting instantly. Though, the news is better. She has mentioned that this $5,000 must grow at 5% per year. Given that the interest rate of 12%, illustrate the PV of inheritance?
Q2. After the retirement of your grandmother, she purchased an annuity contract for $250,000 which will pay her $25,000 at the end of each year till she dies. The suitable interest rate for this annuity is 8%. Compute the number of years which your grandmother should live in order to get more value out of the annuity than what she paid for it.
Q3. You believe you will require $150,000 annually to live at ease while retired. You plan on retiring when you are 65 and will start withdrawing funds from your retirement account on your 66th birthday. If you expect to require 25 years of retirement income then how much money will you require in at retirement (when you are 65) to meet up this goal supposing the fair interest rate is 7%?