Martha left an inheritance to her grandson that will pay him $1,500 on the first day of every other year.When computing the PV of this inheritance,the grandson should use:

Question

Quizplus · Accepted Answer

The correct approach is to use a 2-year discount rate because the payments are received every other year, not annually or semiannually. This matches the timing of the cash flows.

Martha Left an Inheritance to Her Grandson That Will Pay