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Posted by on Thursday, April 9, 2009 at 2:00am.

an inheritance will be 20000. the interest rate for the the time value of money is 7%. How much is the inheritance worth now, if it will be received

a) in 5 years?
b)in 10 years?
c)in 20 years

I know i'm supposed to use F=P(1+i)^n
or P=F(1+i)^-n but I am not sure if the problem is asking me for the future value in 5 yrs or the present value of how much the money is worth now if the inheritance is given in 5,10,20 years.

And are all parts of the question independent. Or when I do partb), do I add the value I got in part a to it.

  • interest - , Thursday, April 9, 2009 at 8:06am

    first one:
    PV = 20000(1.07)^-5
    = 14259.72

    you try the other two.

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