Question

Your brother offers you $75,000 today for a claim to your future inheritance of $500,000, twenty years from today. If the discount rate is 10%, should you accept his offer?

Answer 1

	Present value of $500,000	FV×(1÷(1+r)^n)
	Here,
1	rate per annum	10.00%
2	Number of years	20
3	Number of compoundings per per annum	1
4 = 1÷3	rate per period ( r)	10.00%
5 = 2×3	Number of periods (n)	20
	Future value (FV)	$                       500,000.00
	Present value of $500,000	$                         74,321.81
		500000*(1/(1+10%)^20)

Offer should be accepted.