Time Value of Money Assessment.docx - 1 Colin has inherited $6,000 from the death of Grandma Anna He would like to use this money to buy his mom Hayley

Time Value of Money Assessment.docx - 1 Colin has inherited...

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. 1.)Colin has inherited $6,000 from the death of Grandma Anna. He would like to use this money to buy his mom Hayley a new scooter costing $7,000, two years from now. Will Colin have enough money to buy the gift if he deposits his money in an account paying 8 percent compounded semiannually? 2.)A wealthy industrialist wishes to establish a $2,000,000 trust fund which will provide income for his grandchild into perpetuity. He stipulates in the trust agreement that the principal may not be distributed. The grandchild may only receive the interest earned. If the interest rate earned on the trust is expected to be at least 7 percent in all future periods, how much income will the grandchild receive each year? 3.)Jia has just won a $20 million lottery, which will pay her $1 million at the end of each year for 20 years. An investor has offered her $10 million for this annuity. She estimates that she can earn 10percent interest, compounded annually, on any amounts she invests. She asks your advice on whether to accept or reject the offer. What will you tell her?

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