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Calculate the present value of cindy inheritance

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Reference no: EM132540729

Cindy Arella's godmother just left her an inheritance of $100,000:

Cindy will receive a payment of $100,000 when she turns 21, which will be in 8 years. Here is a diagram:

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The nominal interest rate is 4% per year, and the inflation rate is expected to be 1% per year.

a. Calculate the present value of Cindy's inheritance using nominal cash flows.

b. Draw a diagram of the real cash flow corresponding to Cindy's inheritance.

c. Calculate the present value of Cindy's inheritance using real cash flows.

Reference no: EM132540729

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