Yoda Lucass godmother just left her a large inheritance. Yoda will receive payments of $100,000 for three years, starting when she turns 21, which will be in 4 years. Here is a diagram:

Here is a diagram: 0 1 2 3 4 5 6

Nominal Cash Flow 0yr- ? 1yr-? 2yr- ? 3yr- ? 4yr- $100,000, 5yr-$100,000, 6yr- $100,000

The nominal interest rate is 6% per year, and the inflation rate is expected to be 2% per year.

a. Calculate the present value of Yodas inheritance using nominal cash flows.

b. Draw a diagram of the real cash flow corresponding to Yodas inheritance.

c. Calculate the present value of Yodas inheritance using real cash flows