Question
Your grandmother has told you she can either give you $4,800 now or $5,500 when you graduate from college in three years. Your savings account
Your grandmother has told you she can either give you $4,800 now or $5,500 when you graduate from college in three years. Your savings account earns 4% interest, compounded annually. Which option would be worth more to you now, and how much more? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to 2 decimal places.)
a. The $5,500 in the future is worth $89.50 more than the $4,800 now.
b. The $4,800 now is worth $89.50 more than the $5,500 in the future.
c. The $5,500 in the future is worth $100.00 more than the $4,800 now.
d. The $4,800 now is worth $100.00 more than the $5,500 in the future.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started