What Amount Must Be Placed in a Perpetual Fund Today

question 128

Short Answer

What amount must be placed in a perpetual fund today if the fund earns 3.75% compounded quarterly, and payments of $1,000 are to be made monthly, starting one month from today?

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Definitions:

Current Cost

The cost to replace an asset or inventory at current market prices, differing from historical cost which is the original cost at the time of purchase.

Historical Cost

An accounting principle that assets should be recorded and valued at their original purchase cost.

Future Sacrifice

An expected loss of economic benefits due to commitments or obligations a business has entered into.

Liability

A financial obligation or debt owed by a business to another entity, typically due for repayment in the future.