Your Parents Set Up a Trust for You That You

question 18

Multiple Choice

Your parents set up a trust for you that you will not have access to until your 30th birthday,which is exactly 9 years from today.By prior arrangement,the trust will be worth exactly $200,000 on your 30th birthday.You need cash today and are willing to sell the rights to that trust today for a set amount.If the discount rate for such a cash flow is 12%,what is the maximum amount that someone should be willing to pay you today for the rights to the trust on your 30th birthday?

• A) $72,122.01
• B) $178,571.43
• C) $224,000.00
• D) $225,000.00

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Definitions:

For-Profit Transactions

Financial activities conducted by businesses with the primary objective of earning profit, as opposed to non-profit or charitable activities.

World 3.0

A world where nations balance cooperation in the global economy with national identities and interests.

Global Integration

The process of interconnecting different nations and regions of the world through economic, financial, political, and cultural exchanges.

Importing

The selling in domestic markets of products acquired abroad.