Your Uncle Harry says he will give you $______ three years from now to help you pay for a new car.

1) When the interest rate is 6%, what's the present value of his gift to you?

2) What's the present value if the rate of interest is 3%?

3A) Some people set up trusts or make other financial arrangements to pay for their kid's college education. Martha Klutz knows that when her daughter goes to college the expenses will be $______ per year for four years. [Go on to 3B.]

Her daughter is now a high school sophomore, so the first bill will arrive 3 years from now. The rate of interest is 8%.

3B) How large a trust must Klutz set up today so that her daughter's college education is just paid for in the future?

4) How large would the trust have to be if the rate of interest was 3% instead of 8%?