Harold's parents have offered him a $10,000 high school graduation gift with an option for another $20,000 upon graduation from college in four years.His friends tell him this is a $30,000 gift from his parents,but Harold already knows something about the time value of money.If the expected inflation rate over the next four years is expected to be 4% per year,what does Harold think the gift is worth in today's dollars? How should he explain his thinking to his friends?

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The Answer of Harold's parents have offered him a $10,000 high school graduation gift with an option for another $20,000 upon graduation from college in four years.His friends tell him this is a $30,000 gift from his parents,but Harold already knows something about the time value of money.If the expected inflation rate over the next four years is expected to be 4% per year,what does Harold think the gift is worth in today's dollars? How should he explain his thinking to his friends?

Harold's Parents Have Offered Him a $10,000 High School Graduation