mikeyhenriquez
mikeyhenriquez mikeyhenriquez
  • 02-03-2017
  • Mathematics
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You will receive an inheritance of 500000 in 20 years on your 40th birthday? What is the value of the inheritance today if the discount rate is 10%?

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taskmasters
taskmasters taskmasters
  • 16-03-2017
this problem is a present worth problem, where you need to calculate its present amount. this can be solved using the formula:
P = F(1+i)^(-n)
where p is the present value
f is the future value
i is the interest rate
n is the number of years

substituting the given to the formula
P = (500000) ( 1 + 0.1)^(-20)
P = 74,321 is current value of the inheritance that is 500,000 that 20 years from now
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