Your grandmother has told you she can either give you $4000 now or $5.200 when y

Question

Your grandmother has told you she can either give you $4000 now or $5.200 when you graduate from college in three years. Your savings account earns 6% interest, compounded annually Which option would be worth more to yo now, and how much more? Future alue ofS Presenta u SIEne Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor from the PV tables. Round your final answer to 2 decimal places) O The $4.000 now is worth $40000 more than the $5.200 in the future. O The $5,200 in the future is worth $36592 more than the $4,000 now. 0 The $5.200 in the future is worth $40000 more than the $4000 now? O The $4.000 now is worth $365 92 more than the $5.200 in the future

Explanation / Answer

Present value of $5200 today = 5200*0.8396 = $4365.92 The $5200 in the futire is worth $365.92 more than the $4000 now Option 2 is correct

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