Your Aunt,in Her Will,left You the Sum of $5,000 a Year

question 122

Essay

Your aunt,in her will,left you the sum of $5,000 a year forever with payments starting immediately. However,the news is better. She has specified that the amount should grow at 5% per year to maintain purchasing power. Given an interest rate of 12%,what is the PV of the inheritance?

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Definitions:

Financial Statements

Financial statements are formal records of the financial activities and position of a business, person, or entity, providing key information on its financial health.

Post. Ref. Column

Short for Posting Reference Column, it's used in journal entries to indicate where data is transferred in the ledger.

General Journal

A primary accounting record where financial transactions are initially recorded in chronological order.

Ledger

A comprehensive collection of a company's accounts, including assets, liabilities, equity, revenue, and expenses, used for tracking financial transactions.