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Popular Word Problems >

Your inheritance will pay you 100000 a year for five years beginning now. You can invest it in a CD that will pay 7.75 percent annually.What is the present value of your inheritance?

Solution

Y o u r inh er i t an ce w i ll p a y yo u 100000 a ye a r f or f i v e ye a rs b e g innin g n o w . Y o u c an in v es t i t in a C D t ha t w i ll p a y 7.75 p erce n t ann u a ll y . Wha t i s t h e p rese n t v a l u e o f yo u r inh er i t an ce ?

Solution

Amount : 138750

Solution steps

Translate the problem into an equation:

A = 100000 (1 + 0.0775 \cdot 5)

100000 (1 + 0.0775 \cdot 5) = 138750

Amount : 138750

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