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27 December, 13:28

If he wanted the cash award of each of the five prizes to be $45,000 and his estate could earn 7% per year, how much would he need to fund his prizes

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  1. 27 December, 14:10
    0
    The answer is $3,214,285.71

    Explanation:

    Price of each award is $45,000

    And there are 5

    Therefore, we have 5 x $45,000

    =$225,000.

    So, $225,000 is the future value.

    Rate of return (r) in 7% and it is being assumed that it is forever.

    So, so how much will be needed to fund his prizes (present value) ?:

    PV = FV/r

    = $225,000/0.07

    =$3,214,285.71
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