Answer:
To calculate the amount of money you should invest today to create a trust fund for your successors, we can use the concept of present value. The present value is the current value of a future sum of money, taking into account the interest rate and the time period.
In this case, you want your successors to receive $20,000 per year, and the interest rate offered is 5%. Let's assume that the interest is compounded annually.
The formula to calculate the present value of an annuity is:
PV = A * (1 - (1 + r)^(-n)) / r
Where: PV = Present value (the amount you need to invest today) A = Annual payment amount ($20,000) r = Interest rate per period (5% or 0.05) n = Number of periods (number of years)
Since your successors will receive $20,000 per year, we can substitute these values into the formula:
PV = $20,000 * (1 - (1 + 0.05)^(-n)) / 0.05
Now, we need to determine the value of 'n,' the number of years your successors will receive $20,000. This will depend on how long you want the trust fund to last and provide the annual payment. Once you have that value, substitute it into the formula to calculate the present value (PV).
For example, if you want the trust fund to last for 30 years:
PV = $20,000 * (1 - (1 + 0.05)^(-30)) / 0.05
Using a financial calculator or spreadsheet software, you can calculate the present value, which will give you the amount of money you should invest today to create the trust fund.
Hope it help you