Quint and Jackson are cousins who were both bom on the same day. and both turned
ID: 2767165 • Letter: Q
Question
Quint and Jackson are cousins who were both bom on the same day. and both turned 25 today. Their grandfather began putting $3,000.00 per year into a trust fund for Quint on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's trustee) will make 40 more $3.000.00 payments until a 46th and final pavment is made on Quint's 65th birthday. The grandfather set things up this way because he wants Quint to work, not be a "trust fund baby." but he also wants to ensure that Quint is provided for in his old age. Until now, the grandfather has been disappointed with Jackson, hence has not given him anything. However, thev recently reconciled, and the grandfather decided to make an equivalent provision for Jackson. He w ill make the first payment to a trust for Jackson today, and he has instructed his trustee to make 40 additional equal annual payments until Jackson turns 65. when the 41st and final payment will be made. If both trusts earn an annual return of 8.40 percent, how much must the grandfather put into Jackson's trust today and each subsequent year to enable him to have the same retirement nest egg as Quint after the last payment is made on their 65th birthday?Explanation / Answer
Future value of Qunit's Contribution Payment 3000 Rate 8.40% Nper 46 Year FV Factor = 1.0840^n Fv = 3000 x FV factor 1 1.084 $3,252 2 1.175 $3,525.17 3 1.274 $3,821.28 4 1.381 $4,142.27 5 1.497 $4,490.22 6 1.622 $4,867.4 7 1.759 $5,276.26 8 1.906 $5,719.47 9 2.067 $6,199.9 10 2.240 $6,720.69 11 2.428 $7,285.23 12 2.632 $7,897.19 13 2.854 $8,560.56 14 3.093 $9,279.64 15 3.353 $10,059.13 16 3.635 $10,904.1 17 3.940 $11,820.04 18 4.271 $12,812.93 19 4.630 $13,889.21 20 5.019 $15,055.91 21 5.440 $16,320.6 22 5.897 $17,691.53 23 6.393 $19,177.62 24 6.930 $20,788.54 25 7.512 $22,534.78 26 8.143 $24,427.7 27 8.827 $26,479.63 28 9.568 $28,703.92 29 10.372 $31,115.05 30 11.243 $33,728.71 31 12.187 $36,561.92 32 13.211 $39,633.12 33 14.321 $42,962.3 34 15.524 $46,571.14 35 16.828 $50,483.11 36 18.241 $54,723.7 37 19.773 $59,320.49 38 21.434 $64,303.41 39 23.235 $69,704.89 40 25.187 $75,560.1 41 27.302 $81,907.15 42 29.596 $88,787.35 43 32.082 $96,245.49 44 34.777 $104,330.11 45 37.698 $113,093.84 46 40.865 $122,593.72 $1,543,328.53 Jackson should also has $1,543,328.53 x*1.0840+ x*1.0840^2 + ... + x*1.0840^41 = $1,543,328.53 Payment to jackson = $1,543,328.53/339.43 $4,546.88
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