You would like to establish a trust fund that will provide $50,000 a year forever for your heirs. The trust fund is going to be invested very conservatively so the expected rate of return is only 2.75%. How much money must you deposit today to fund this gift for your heirs?

A) $1,333,333.33
B) $1,375,000.00
C) $1,425,000.00
D) $1,666,666.67
E) $1,818,181.82

To find out how much money must be deposited today to fund a perpetual gift of $50,000 a year at a 2.75% rate of return, you use the formula for the present value of a perpetuity: PV = PMT / i, where PV is the present value (the amount of money you need to deposit today), PMT is the annual payment ($50,000), and i is the annual interest rate (2.75% or 0.0275 in decimal form). Plugging in the numbers: PV = $50,000 / 0.0275 = $1,818,181.82.