Your aunt in her will left you the sum of $5000 a year forever with payments starting immediately. However, the news is better. She has specified that the amount should grow at 5% per year to maintain purchasing power. Given an interest rate of 12% . (1) what is the PV of the inheritance.

Your aunt in her will left you the sum of $5000 a year forever with payments starting immediately. However, the news is better. She has specified that the amount should grow at 5% per year to maintain purchasing power. Given an interest rate of 12% . (1) what is the PV of the inheritance.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 10E

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Question

(1) what is the PV of the inheritance.

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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