Your grandfather left you an inheritance that will provide an annual income for the next 10 years. You will receive the first payment one year from now in the amount of $4,000. Every year after that, the payment amount will increase by 6 percent. What is your inheritance worth to you today if you can earn 9.5 percent on your investments?

Question

Quizplus · Accepted Answer

The present value of a growing annuity formula is used to calculate the worth of the inheritance today. Using the formula: PV = Pmt * [(1 - (1 + g)^n / (1 + r)^n) / (r - g)], where Pmt = $4,000, g = 6% (0.06), r = 9.5% (0.095), and n = 10, the present value is approximately $31,699.15.

Your Grandfather Left You an Inheritance That Will Provide an Annual