At the reading of the will, you learn that your inheritance will allow you to receive...

At the reading of the will, you learn that your inheritance will allow you to receive the amount of $480 at the end of each year for a total of 13 consecutive years. However, because of your young age, these amounts will not begin until the end of 6 years. If the interest rate is 7%, what is the equivalent present value of the inheritance?

Solutions

Expert Solution

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=480/1.07^6+480/1.07^7+480/1.07^8+480/1.07^9+480/1.07^10+480/1.07^11+480/1.07^12+480/1.07^13+480/1.07^14+480/1.07^15+480/1.07^16+480/1.07^17+480/1.07^18

which is equal to

=$2860.27(Approx)

jeff jeffy answered 2 years ago

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