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?
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
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