You expect to receive an inheritance of $50,000 six years from now. Its present worth at a real interest rate of 4% per year and an inflation rate of 3% per year is closest to: (choose one)
(a) $27,600
(b) $29,800
(c) $33,100
(d ) $50,000
if = 0.04 + 0.03 + (0.04)(0.03) = 0.0712 (7.12%)
P = 50,000[1/(1 + 0.0712)6] = $33,094
Answer is (c) $33,100
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