Question
When Alfred Nobeldied, he left the majority of his estate to fund fiveprizes, each to be awarded annually in perpetuity starting one year after he
When Alfred Nobeldied, he left the majority of his estate to fund fiveprizes, each to be awarded annually in perpetuity starting one year after he died(the sixthone, ineconomics, was addedlater).
a. If he wanted the cash award of each of the five prizes to be 38,000 and his estate could earn 9% peryear, how much would he need to fund hisprizes?
b. If he wanted the value of each prize to grow by 4% per year(perhaps to keep up withinflation), how much would he need toleave? Assume that the first amount was still $38,000.
c. His heirs were surprised by his will and fought it. If they had been able to keep the amount of money you calculated in
(b), and had invested it at 9% peryear, how much would they have in2014, 118 years after hisdeath?
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