Question

Karsten is preparing his will. He wants to leave the same amount of money to his two daughters. His elder daughter is careful with money, but the younger daughter spends it carelessly, so he decides to give them the money in different ways. How much must his estate pay his younger daughter each month over 20 years, so that the accumulated present value will be equal to the $50000 cash his elder daughter will receive upon his death? Assume that the younger daughters inheritance earns 6%/a compounded monthly

Answer 1

The amount that Karsten's estate should pay his younger daughter each month over 20 years so that the accumulated present value will be equal to $50,000 is $358.22.

How to calculate periodic payments?

The monthly payments out of the present value of $50,000 can be computed using an online finance calculator.

The periodic payment represents the equal amount that can be paid to the daughter monthly so that it equals the PV of $50,000 of the estate share.

Data and Calculations:

N (# of periods) = 240

I/Y (Interest per year) = 6%

PV (Present Value) = $50,000

FV (Future Value) = $0

Results:

Monthly Payment = $358.22

Sum of all periodic payments = $85,971.73 ($358.22 x 2400

Total Interest = $35,971.73

Thus, Karsten's younger daughter can be paid $358.22 to equal the accumulated present value of $50,000.

Learn more about periodic payments at https://brainly.com/question/13098072 and https://brainly.com/question/13031679

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