You Have Just Turned 27 and May Now Spend a Portion

question 33

Multiple Choice

You have just turned 27 and may now spend a portion of the trust fund your parents established for you.The terms of the trust fund allow you to withdraw 50 beginning-of-the-year cash flows of $40,000 each.An investment firm has offered to pay you cash for all of the fund today.If the rate they use to discount the cash flows is 14% per year,what is their offer price today for your pension fund?

• A)$2,605,750,853
• B)$2000,000.00
• C)$624,915.20
• D)$325,249.13

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Definitions:

Joint Venture

A partnership established for a specific project or for a limited time.