Becky Wilkinson wants to establish a trust fund that will provide her children and heirs with a perpetual annuity in the amount of thousand dollars per year beginning next year.If the trust fund will earn an interest rate of 10% per year compounded continuously, find the amount that she must place in the trust fund now. Hint: Use the formula .

Question

Becky Wilkinson wants to establish a trust fund that will provide her children and heirs with a perpetual annuity in the amount of  thousand dollars per year beginning next year.If the trust fund will earn an interest rate of 10% per year compounded continuously, find the amount that she must place in the trust fund now. Hint: Use the formula  .

Quizplus · Accepted Answer

Using the formula A = Pe^(rt) where A is the amount in the trust fund, P is the principal or initial deposit, r is the interest rate, and t is the time in years, we can solve for P as follows:

P = A/e^(rt)

We are given A = $11,000, r = 0.1 (10% as a decimal), and t = 0 (since the annuity begins next year). Plugging in these values, we get:

P = 11000/e^(0.1*0) = $100,000

Therefore, Becky must place $100,000 in the trust fund now to provide her children and heirs with a perpetual annuity of $11,000 per year beginning next year.

The correct answer is C, $11eb12b0_a94a_d68a_b394_b76c38442ff7_TB7866_11.

Becky Wilkinson Wants to Establish a Trust Fund That Will