1. Suppose your parents offer you $30,000 this year to pay for a year of college. You tell them that you would rather have money in three years after you graduate. Assume that the interest rate (i.e., the rate of discount) is 5 per cent. a. If your parents' offer of $30,000 is the presented discounted value of some unknown number of dollars after three years have passed, what is the dollar value of that number? In other words how much will they give you at the end of three years if they were using the formula for present discounted value?

b. Assume they tell you they never learned about discounting, and don't know what you're talking about. They decide to just give you $30,000 after three years. Do you prefer the money today or in three years time? Why? c. Instead of the cash up front and some money in three years, you ask them for a certain amount of cash each year for the rest of your life beginning next year (you can assume that you will live forever). What amount would they give you annually to equal a present discounted value of $30,000 today?