Question

five brothers of 4, 9, 11, 13 and 16 years respectively, receive an inheritance of 1,500,000, the will stipulated that that amount must be shared by the heirs so that, placed the shares in a bank, they would result in equal capitalized amounts, when each one reached 21, could raise his share. Knowing that the bank charges an interest rate of 9% per year, what is the amount of each share?

Answer 1

9514 1404 393

Answer:

Youngest to oldest:

• 160,406.86
• 246,805.83
• 293,230.01
• 348,386.58
• 451,170.72

Explanation:

At 9% interest per year, the present value of 1 at age 20 is ...

p(a) = 1.09^(a-20)

Adding the present values for the different ages, we get a total of about 2.35528984846. Dividing the inheritance by that amount gives the multiplier for each of the present value numbers. The result is the list of shares shown above. At age 20, each brother will inherit about 636,864.29.

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Additional comment

This is the sort of question that suggests the use of a graphing calculator or spreadsheet for doing the tedious number crunching.

(We assume the bank pays 9% per year, rather than charges 9% per year.)