Your great-aunt left you an inheritance in the form of a trust.The trust agreement states that you are to receive $2,000 on the first day of each year,starting immediately and continuing for fifty years.What is the value of this inheritance today if the applicable discount rate is 6.35 percent?

Question

Quizplus · Accepted Answer

The value of the inheritance today is the present value of an annuity due. The formula for the present value of an annuity due is PV = Pmt * [(1 - (1 + r)^-n) / r] * (1 + r), where Pmt is the payment amount, r is the discount rate, and n is the number of periods. Plugging in the values: PV = $2,000 * [(1 - (1 + 0.0635)^-50) / 0.0635] * (1 + 0.0635) = $31,953.94.

Your Great-Aunt Left You an Inheritance in the Form of a Trust.The