Present and Future Values. Megan Berry, a freshman horticulture major at the University of Minnesota, has some financial questions for the next three years of school and beyond. Answers to these questions can be obtained by using Appendix A or the Garman/Forgue companion website.

(a) If Megan’s tuition, fees, and expenditures for books this year total $22,000, what will they be during her senior year (three years from now), assuming costs rise 4 percent annually? (Hint: Use Appendix A.1 or the Garman/Forgue companion website.)

(b) Megan is applying for a scholarship currently valued at $5,000. If she is awarded it at the end of next year, how much is the scholarship worth in today’s dollars, assuming inflation of 3 percent? (Hint: Use Appendix A.2 or the Garman/Forgue companion website.)

(c) Megan is already looking ahead to graduation and a job, and she wants to buy a new car not long after her graduation. If after graduation she begins an investment program of $2,400 per year in an investment yielding 4 percent, what will be the value of the fund after three years?

(Hint: Use Appendix A.3 or the Garman/Forgue companion website.)

(d) Megan’s Aunt Karroll told her that she would give Megan $1,000 at the end of each year for the next three years to help with her college expenses. Assuming an annual interest rate of 2 percent, what is the present value of that stream of payments? (Hint:

Use Appendix A.4 or the Garman/Forgue companion website.)

AppendixLO1