Problema Solution
Suppose that an insurance agent offers u a policy that will provide you with a yearly income of 50,000 in 30 years. What is the comparable salary today,assuming an inflation rate of 5% compounded annually?
Answer provided by our tutors
A = $50,000 is future value
r = 0.05 or 5%
t = 30 years
m = 1 number of compounding periods per year
i = r/m = 0.05/12 interest rate per period
n = 30*1 = 30 total number of compounding periods
A = P(1 + i)^n
P = A / ((1 + i)^n)
P = 50,000 / ((1+ 0.05/12)^30)
P = $44,136.31 is the comparable salary today
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