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Your grandfather gives you three options for an inheritance

Your grandfather wants to award to you the portion of his estate allocated to you as an inheritance. He gives you three options to receive your cash: 1) $5,000 today; 2) $1,000 per year for the next eight years; or 3) $12,000 at the end of eight years. The intermediate-term money market is currently paying 11%.

Which inheritance option would be best? Why? How might your decision change if the money market is paying 12%?

Must show your work - you must apply objectives means to arrive at a conclusion. If you used Excel, list the formula you used to arrive at your answer. If you used a financial calculator, list the key strokes you used. Lastly, if you used the time value values in the appendix or used the time value formulas, show your calculations.

Solution Preview

Your grandfather wants to award to you the portion of his estate allocated to you as an inheritance. He gives you three options to receive your cash: 1) $5,000 today; 2) $1,000 per year for the next eight years; or 3) $12,000 at the end of eight years. The intermediate-term money market is currently paying 11%.

Which inheritance option would be best? Why? How might your decision change if the money market is paying 12%?

must show your work - you must apply objectives means to arrive at a conclusion. If you used Excel, list the formula you used to arrive at ...

Solution Summary

This solution is comprised of a detailed explanation to answer which inheritance option would be best, and why or how might your decision change if the money market is paying 12%.

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