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Due to a car accident you receive a settlement from insurance of $50 a month for...

Due to a car accident you receive a settlement from insurance of $50 a month for the next ten years. What is that worth to you today, assuming a 3% inflation rate?

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Answer #1

ANSWER:

Inflation rate = 3% per year or 3% / 12 per month = 0.25% per month

monthly settlement = $50

present value = ?

n = 10 years or 120 months

pv = monthly settlement(p/a,i,n)

pv = 50(p/a,0.25%,120)

pv = 50 * 103.6

pv = 5,180

so the $50 a month settlement from insurance is worth $5,180 in today's dollars.

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