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Q: inheritance ( Answered,   0 Comments )
Question  
Subject: inheritance
Category: Miscellaneous
Asked by: pheifer-ga
List Price: $2.00
Posted: 14 Oct 2003 10:32 PDT
Expires: 13 Nov 2003 09:32 PST
Question ID: 266144
You will receive a $100,000 inheritance in 20 years. You can invest
that money today at 6% compounded annually.  What is the present value
of your inheritance?
Answer  
Subject: Re: inheritance
Answered By: reeteshv-ga on 15 Oct 2003 04:15 PDT
 
Dear pheifer-ga,

Good day!

The Present Value of a Future Amount is calculated using the following
formula:

FV = PV(1+r)^N

where
FV = Future Value
PV = Present Value
r = Interest Rate per period
N = No. of Compounding Periods

For the problem at hand,
FV = $ 100,000
r = 6%
N = 20
PV = ?

PV = 100,000 / (1 + 0.06)^20
PV = $ 31,180.47

Thus, $ 31,180.47 invested today at 6% compund interest rate will
become $ 100,000 in 20 years!

Jope this answer satisfies you :)

Thanks & regards,
reeteshv-ga

Additional links:

A very user-friendly article on the Present Value along with PV
calculator is available at moneychimp:
http://www.moneychimp.com/articles/finworks/fmpresval.htm

A concise PV calculator is available here:
http://www.tcalc.com/tvwww.dll?User


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Present value
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