Carl is the beneficiary of a $24,000 trust fund set up for him by his grandparents. Under the terms of the trust, he is to receive equal installments from this fund at the end of each year over an 8-year period. If the fund earns interest at the rate of 10%/year compounded annually, what amount will he receive each year? Assume that the balance in the fund is zero after the last installment is received. (Round your answer to the nearest cent.)
$______
| Amount received each year | = | Present Value of annual cash inflows /Present value of annuity of 1 | |||||||||
| = | $ 24,000 | / | 5.334926 | ||||||||
| = | $ 4,498.66 | ||||||||||
| Working: | |||||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||||
| = | (1-(1+0.10)^-8)/0.10 | i | 0.10 | ||||||||
| = | 5.3349262 | n | 8 | ||||||||
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