A 910000 B 520866 C 1000000 D 940741 Suppose that you learn

A) 910,000

B) 520,866

C) 1,000,000

D) 940,741

Suppose that you learn that a friend recently received a substantial inheritance. Your friend was given two choices: 1) wait 10 years and receive the inheritance or 2) receive the present value of the inheritance (using a 3% discount rate) now. Your friend chose option #2, and received a hefty $700,000. How much would your friend have received if she waited 10 years to take the inheritance?

Present value(PV) which he receives=700000

i=3%

Future value(FV)=PV(1+i)¹⁰

FV=700000(1+0.03)¹⁰

FV=700000(1.03)¹⁰

FV=938000 (approx)

correct option is D which is close to approximate value.

A) 910,000 B) 520,866 C) 1,000,000 D) 940,741 Suppose that you learn that a friend recently received a substantial inheritance. Your friend was given two choice

A 910000 B 520866 C 1000000 D 940741 Suppose that you learn

Solution

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