Answer:
This question relates to Present Value.
Real Interest rate is 3%;
= Principal / (1 + rate) ^ number of years
= 5,000 / ( 1 + 3%)⁴
= $4,442.44
Real Interest rate is 5%;
= 5,000 / ( 1 + 5%)⁴
= $4,113.51
Real Interest rate is 10%;
= 5,000 / ( 1 + 10%)⁴
= $3,415.07
The worth of the money my grandma would give me when real interest rate is 3% is $4,442.44.
The worth of the money my grandma would give me when real interest rate is 5% is $4,113.51.
The worth of the money my grandma would give me when real interest rate is 10% is $3415.07.
In order to determine the worth of the money today, the present value has to be determined. Present value is the sum of discounted cash flows.
Present value when real interest rate is 3% = $5000 / (1.03^4) = $4,442.44
Present value when real interest rate is 5% = $5000 / (1.05^4) = $4,113.51
Present value when real interest rate is 10% = $5000 / (1.1^4) = $3415.07
To learn more about present value, please check: https://brainly.com/question/26537392
