Inheritance alternative
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Your uncle has given you three alternatives for your inheritance. You can have $5,000 now; $1,000 per year for the next eight years; or $12,000 at the end of eight years. You assume your opportunity cost or discount rate is 11% interest annually.
1. Which inheritance alternative would be best? Why?
2. Would your decision be different if you could earn interest at 13%?
3. Would your decision be different if you knew the economy was declining and the risk of non-payment eight years from now was risky?
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Solution Summary
This provides the steps to calculate and compare the value of inheritance alternatives
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Your uncle has given you three alternatives for your inheritance. You can have $5,000 now; $1,000 per year for the next eight years; or ...
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