How much is the present cost

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Reference no: EM131810816

Bob has lost his job and had to move back in with his mother. She agreed to let Bob have his old room back on the condition that he pay her $1000 rent per year, and an additional $1000 every other year to pay for her biannual jaunt to Florida. Since he is down on his luck, she will allow him to pay his rent at the end of the year. If inflation is 6% and Bob's interest rate is 15%, how much is the present cost (in Year-1 dollars) for a 5-year contract? (Note: Mom's trips are in Years 2 and 4).

Reference no: EM131810816

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