### Computation of pv and future annual payments

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Computation of PV and Future Annual Payments and principal amount

Linda has decided to set up an account that will pay her granddaughter (Janice) \$5,000 a year indefinitely. How much should Linda deposit in an account paying 8 percent annual interest?

1. A wealthy industrialist wishes to establish a \$2,000,000 trust fund which will provide income for his grandchild into perpetuity. He stipulates in the trust agreement that the principal may not be distributed. The grandchild may only receive the interest earned. If the interest rate earned on the trust is expected to be at least 7 percent in all future periods, how much income will the grandchild receive each year?

2. Cara establishes a seven?year, 8 percent loan with a bank requiring annual end?of?year payments of \$960.43. Calculate the original principal amount

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