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 $250 rent per month, and an additional $1500 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 3% and Bob’s interest rate is 5%, how much is the present cost (in Year-1 dollars) for a 5-year contract with mom? (Note: Mom’s trips are in Years 2 and 4).
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 $250 rent per month, and an additional $1500 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 3% and Bob’s interest rate is 5%, how much is the present cost (in Year-1 dollars) for a 5-year contract with mom? (Note: Mom’s trips are in Years 2 and 4).
Chapter16: Tax Research
Section: Chapter Questions
Problem 50RC
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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 $250 rent per month, and an additional $1500 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 3% and Bob’s interest rate is 5%, how much is the present cost (in Year-1 dollars) for a 5-year contract with mom? (Note: Mom’s trips are in Years 2 and 4).
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