You Just Inherited a Trust That Will Pay You $100,000

question 71

Multiple Choice

You just inherited a trust that will pay you $100,000 per year in perpetuity. However, the first payment will not occur for exactly five more years. Assuming a 10 percent annual interest rate, what is the value of this trust?

• A)$620,921
• B)$683,013
• C)$1,000,000
• D)$1,100,000

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Definitions:

Unequal-variances T-test

A statistical test used for comparing the means of two groups that do not have the same variance.

Non-integer Number

A value that is not a whole number, including fractions, decimals, and irrational numbers.

Two-tailed Test

A statistical hypothesis test in which the area of rejection is on both sides of the sampling distribution, allowing for the possibility of an effect in two directions.

Independent Populations

Populations in which the outcomes or characteristics of a sample from one population are not affected by the outcomes or characteristics of a sample from another population.