Question
The parents of a disabled child are setting up a trust fund so that the child will have guaranteed income of $3000 per month when
The parents of a disabled child are setting up a trust fund so that the child will have guaranteed income of $3000 per month when he turns 21 and they want him to be able to draw on this fund for 20 years. They started investing in the fund quarterly when the child was born and wanted to have it funded within 14 years. We'll assume their money is earning 5.5% interest, compounded quarterly both during the accumulation phase and the annuitization (withdrawing) phase. Hint: This problem requires solving 2 separate problems. Notice that one is quarterly and one is monthly. Round to the nearest cent. How much money will they need to deposit each quarter in order to allow their son to withdraw the desired amount at age 21?
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