Question
Your Uncle Tran wants to give you some money (nice), but because you are so young, he does not want to give it all to
Your Uncle Tran wants to give you some money (nice), but because you are so young, he does not want to give it all to you at once, which of course you want.
He will give you three separate payments (amounts) over 12 years as follows:
10000 at the end of Year 3
15000 at the end of Year 6
25000 at the end of Year 12
Because you know about the time value of money, you can get your Aunt Sue to give you a lump sum payment now if you sign a contract over to her that you will give her Uncle Tran's future payments when you get them.
Even though she trusts you, she values her money at 8% per year, so the APR is 8% compounded annually, and she makes you sign that contract.
How much will Aunt Sue give you now for these three promised future payments? (In other words, what is thePresent Valueof these three future values?)
(TWO Decimal Places, NO Commas, NO Dollar Signs ($))
(Hint: One way to solve this is to bring each of these three separate amounts back to the present (compute the present value of each) and add them up.)
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