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Robert has inherited some money from his great-grandfather. He will get $5000 when he graduates college...

Robert has inherited some money from his great-grandfather. He will get $5000 when he graduates college (at age 22) and an additional $10,000 at the age of 25. He is currently 20 years old. What is the present value of his future inheritance if the interest rate is 8%?

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Answer #1

Present value = Future value / [1 + R]T

R = interest rate

T = time in years

Present value = [$5,000 / (1 + 0.08)2] + [$10,000 / (1 + 0.08)5]

Present value = [$5,000 * 0.85734] + [$10,000 * 0.680583]

Present value = $4,286.69 + $6,805.83

Present value = $11,092.53

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