Your Uncle has two alternative inheritence for you.

A. You receive 5000 today and 1000 per year for the next 8 years.
or
B. 5000 today and nothing each year for the next 7 years and at end of 8th year receive 12,000

Which is best and why.

Current interest rate is 10% annually on both scenerios.

Compare what you would have at the end of eight years if you invested the payments and got 10% interest. That means comparing
A. 5000*(1.1)^8 + 1000*(1.1)^7 + 1000*(1.1)^6 + 1000*(1.1)^5 + .. 1000*(1.1)+ 1000.
and
B. 5000*(1.1)^8 + 12,000.
Both options get 8 years of compounded interest on $5000, so let's just compare the rest.
Option A gets an additional 1948.72 + 1771.56 + 1610.51 + 1464.10 + 1331.00 + 1210.00 + 1100.00 + 1000.00. That assumes a $1000 payment at the end of the eighth year. The total is 11,435.89 extra after 8 years, compared to $12,000 for option B. Go with B. Many people would choose A anyway, for the benefit of more current income.

Thanks so much. I reviewed what you listed and it actually made sense. That was very helpful.

You're welcome! I'm glad I could help you understand the comparison between the two inheritance options. It's important to consider the value of the payments over time, especially when factoring in interest rates. In this case, option B would give you a higher total value at the end of eight years due to the lump sum payment. However, some people might prefer option A for the benefit of receiving regular income over the years. Ultimately, the decision depends on your personal financial goals and priorities. If you have any more questions, feel free to ask!