Question

Your inheritance will pay you $100,000 a year for five years beginning now. you can invest it in a cd that will pay 7.75 percent annually. what is the present value of your inheritance? (round to the nearest dollar.)

Answer 1

The present values of inheritance is $138750, because the inheritance is invested in CD that will pay 7.75 percent annually for five years. Therefore additional amount can be calculated as additional amount on Inheritance= (Principle value of inheritance 100000* rate the CD will pay 7.75 * no of years 5 ) / 100= $38750 Total Inheritance= principle inheritance 100000 + additional amount on inheritance 38750=$138750