What is the current economic value of an inheritance that will pay $2,500 to the beneficiary at the beginning of every three months for 20 years starting when the beneficiary reaches 21 years of age, 5¼ years from now? Assume that money can earn 6% compounded monthly.

Learning Objectives

• Absorb and put into practice the time value of money essentials to figure out the present and future values of assorted financial instruments.
• Appraise the economic evaluation of annuities and perpetuities, taking into account ordinary annuities, annuities due, deferred annuities, and perpetuities, amidst a range of compounding frequencies.