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Person A leaves an estate of $100,000. Interest on the estate is paid at the end of the year to beneficiary B for the first 10 years, to beneficiary C for the next 10 years, and to charity D afterwards. Find the relative shares of B,C and D in the estate, if it is assumed that the estate will earn a 7% annual effective rate of interest.

If it is possible to give me a hint as to how the value is $7000 at first.

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perhaps you could post similar questions here: money.stackexchange.com if you want to include ideas about discounting and future value of money. –  Vincent Tjeng Feb 27 '13 at 1:08
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1 Answer

If the interest is paid as earned, there is no compounding and it is $7\% \cdot 100,000 = 7,000$ per year. $B$ gets the first $10$ for a total of $70,000$. $C$ gets the next $10$ for a total of $70,000$. If $D$ is paid immediately after the last payment to $C$, it gets $100,000$. Ignoring any discount for later payments, $B$'s share is $\frac {70000}{240000}$ and so on.

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