In His Will, Andrew Baker Provided for the Establishment of a Trust

question 11

Essay

In his will, Andrew Baker provided for the establishment of a trust that will include the bulk of his estate assets. At the time of his death, his net assets had a market value of $430,000 consisting of $75,000 in cash, $125,000 of U.S. Treasury bonds including accrued interest, and the remainder in various securities. Income beneficiaries of the trust will be the same as the income beneficiaries of the estate. Fiduciary Bank will act as trustee.
Required:

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Definitions:

Compound Interest

The process of computing interest by including both the primary sum borrowed or deposited and the interest that has previously accumulated over time.

Estimated Cost

A prediction or approximation of the cost of goods or services, based on current and past information, before the actual expense is known.

Net Present Value

A method used in capital budgeting to determine the profitability of an investment by calculating the sum of its present values of all expected future cash flows.

Present Value Index

A financial metric used to evaluate the present value of future cash flows in relation to the initial investment, also known as the profitability index.