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What is the value of the inheritance today

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Question 1: You will receive an inheritance of $500,000 in 20 years on your 40th birthday. What is the value of the inheritance today if the discount rate is 10%?

Option 1: 74,321.81

Option 2: 500,000

Option 3: 50,000

Option 4: 3,363,749

Question 2: What is the present value (i.e., price) today of a bond that will pay its owner $1,000,000 five years from today if the discount rate is 4% per annum?

(This is called a zero-coupon or pure discount bond)

Option 1: 40,000

Option 2: 1,000,000

Option 3: 1,216,652.90

Option 4: 821,927.11

Reference no: EM132685955

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