Question
Currently, the bank pays an interest rate of 7% on most long-term deposits. A man has been named the beneficiary of a will. He needs
Currently, the bank pays an interest rate of 7% on most long-term deposits. A man has been named the beneficiary of a will. He needs your help in selecting one of the three options mentioned in the will. As per the first option, he is entitled to a sum of $20,000 per year forever during his lifetime and his estate will receive such sums even beyond his death through all future generations.
He (and his estate) will receive $10,000 next year (a year from today) and that sum will grow at 3% per year forever.
What is the value of this option?
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Advanced Accounting
Authors: Gail Fayerman
1st Canadian Edition
9781118774113, 1118774116, 111803791X, 978-1118037911
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