Your grandfather left an inheritance for you of $100,00. However you can only drawdown on the investment as follows: years 1 - 3  $15,000 each year Years 4 - 6  $10,000 each year year   7       $25,000 Interest on the fund is 5%. a)  What is the present worth of this inheritance? b)  Due to high liquidity interest rate have dropped to 4%.  What will be the

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Your grandfather left an inheritance for you of $100,00. However you can only drawdown on the investment as follows:

years 1 - 3  $15,000 each year

Years 4 - 6  $10,000 each year

year   7       $25,000

Interest on the fund is 5%.

a)  What is the present worth of this inheritance?

b)  Due to high liquidity interest rate have dropped to 4%.  What will be the impact on the present worth of this inheritance as a consequence of the market change?

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