You have a turtle that you love to death. Her name is Cassiopeia. You found her

Question

You have a turtle that you love to death. Her name is Cassiopeia. You found her roaming the streets two years ago, but have no idea how old she actually is. You do know that turtles live longer than humans, so you figure that you want to leave an endowment in a trust to secure a place for her in a pet resort for as long as she lives (whatever that may be). How much money would it take to secure $1,800 a year in - 2 of 2 - perpetuity from the trust, if the annual rate of return of the trust’s investment portfolio is 7%?

Explanation / Answer

Answer:

We need to invest an amount which will give $1800 a year for Cassiopeia.We need to calculate perpetuity for $1,800.

Value of a perpetuity = Annuanl payments/ Annual rate

= 1800 / 7%

= $ 25,714.29 (Answer)

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