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Question
Your Uncle Joe recently died and left you payable when you turn 30. You are now 20 years old. At the moment, the annual rate of interest obtained by purchasing 10-year bonds is percent. Your brother is currently offering you in cash to sign over your inheritance. Should you go ahead with it? Explain your response.
Solution
VerifiedAnswered 2 years ago
Answered 2 years ago
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1 of 3It should be borne in mind that the $10,000 that Uncle Joe left we will be able to dispose of in 10 years (when he turns 30), however, our brother is offering us $6,000 today and leave the inheritance to him. Taking an interest rate of 6.5% on 10-year bonds, we can calculate the present value (PV) of these $10,000.
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