First, figure out the annuity as if it started next year:
This is what it is worth on your 20th birthday. Now figure out what it is worth 2 years earlier, on your 18th birthday:
11.3
3. Imagine that you have a trust fund that pays $500,000 per year for 10 years,
starting when you turn 21. If interest rates are 10%, what is that fund worth to you on
your 18th birthday? (2 pts)
First, figure out the annuity as if it started next year:
This is what it is worth on your 20th birthday. Now figure out what it is worth 2 years
earlier, on your 18th birthday:
