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Calculating initial amount deposited by grandparents

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You are 21 years old today. Your grandparents set up a trust fund that will pay you $25,000 per year for 20 years, starting on your 65th birthday to supplement your retirement. If the trust can earn 7.5% per year, how much will your grandparents need to put it the trust fund today?

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Solution Summary

The solution describes the steps for calculating the initial amount deposited by grandparents so that desired financial objective is achieved. How much the grandparents would need to put in a trust fund today is determined.

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Solution:

Amount withdrawn per annum from 65th birthday=R=$25000
Rate of interest=7.5%
Number of drawings=n=20

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Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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