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(b) Rachael is applying for a scholarship currently valued at $ 5000. If she is

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Rachael is applying for a scholarship currently valued at $ 5000. If she is awarded it at the end of next year, how much is the scholarship worth in today’s dollars, assuming inflation of 3 percent?

Oct 18th, 2014

The purchasing power at the end of next year will be 3% less than now because of inflation

3% of $5000 = 3/100 x  $5000 = $150

Hence scholarship is worth $5000 - $150 =  $4850  in today’s dollars

Oct 18th, 2014

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Oct 18th, 2014
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