Question

Jed is considering the purchase of a unit investment trust (UIT) with a three-year life. The UIT promises a payment of $5,000 next year and the payments are expected to grow at 10% per year for the subsequent two years. If Jed’s required return on the investment is 7.5%, what should he be willing to pay for the UIT?

$16,550.00

$13,322.10

$14,280.50

$12,434.26

Nellie just retired with a $1,300,000 retirement fund. If she earns 4% on the balance of the fund and removes $150,000 per year, how long will the money in her fund last before it reaches a zero balance?

7.59 years

8.67 years

55.06 years

10.85 years

-7.59 years

Answer 1