1. As you continue your discussions, let's review another example.
How much money will Joe's wife receive when she gets her share?
Joe has a son and a wife who is not the mother of the son. He wants to write his will so that they will be treated equitably. The son is currently 10 years old. In his will, Joe provides that $100,000 will be used to invest at the then current interest rates. The son will receive the annual income from the investment until the son is 21. At that time, the son will receive no further income from the investment. Joe wants to have the rest go to his wife but he doesn't want her to get it for another 10 years after the son turns 21. Joe has his reasons for this. After making his will Joe lives another 2 years and then dies. The interest rate on suitable investments at that time is 8%.
2. As you continue your discussions, let's review another example. What happens to the TVM Model if a person who takes out a 5-year car loan is really planning on paying the loan off in 3 years?