- When a small child, Derek’s grandfather established a trust fund for him to receive $20,000 on his thirty-fifth birthday. (Any earnings beyond $20,000 reverted to his grandfather.) Derek just turned 23. What is the value of his trust today if the trust fund earns 7 percent interest? What is the present value if he had to wait until age 40 to receive the money?
- You and 11 coworkers just won $12 million from the state lottery. Assuming you each receive your share over 20 years and that he state lottery earns a 5.5 percent return on its funds, what is the present value of your prize before taxes if you request the “up-front cash” option?
- Four years ago, you began contributing to an employer 401(K) plan that is now worth $5,000. If you deposit $3,000 a year and your employer matches 50 percent of your contribution for the next 15 years, how much will the account be worth assuming an 8 percent average annual return?