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%?

Question

inowalst · Answer

@SolomonZelman @dan815 @TheSmartOne

dan815 · Answer

okay so umm im not too sure what discount rate is exactly if u can explain that

inowalst · Answer

xD I'm not too sure, either. I started Finance like a week ago and it's been kinda hard.

dan815 · Answer

okay so that discount rate is like a compound interest thing basically

inowalst · Answer

@Serenity74

serenity74 · Answer

Wouldn't it be 10% - the total amount since it's asking for TODAY???

serenity74 · Answer

it;s DISCOUNT RATE

dan815 · Answer

http://prntscr.com/9dwfoo

inowalst · Answer

I'll try that. Hold on.

dan815 · Answer

now you start * with some account x and you end up with 500,000 so starting with what u should get now so that its equal to that while applying a 10% compound rate x*(1+10%)^20 = 500,000

serenity74 · Answer

wait Dan is right

inowalst · Answer

Of course he is. He's Dan.

dan815 · Answer

loool

serenity74 · Answer

Dats da the thing he is Dan not the man :p @dan815

inowalst · Answer

@dan815 Can you help me with like.. 2 more?

Also, Dan's the man, too. c:

dan815 · Answer

omg pls delete these comments i feel embarassed

dan815 · Answer

xD

inowalst · Answer

xD It's fiiine.

dan815 · Answer

okay lemme see these other questions

dan815 · Answer

finance is kinda annoying because they have their own words for everything

inowalst · Answer

Yes! Omg. .-.