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Llana [10]
2 years ago
15

Reuben would like to buy a car that costs $25,000 today when he graduates from college in 5 years. If the rate of inflation is e

xpected to be 3% per year over the next 5 years, how much would Reuben expect to pay for a similar car in today's dollars
Business
1 answer:
Helga [31]2 years ago
5 0

The future value of the car that costs $25,000 today in 5 years at an inflation rate of 3% per year is <u>$28,981.85.</u>

<h3>What is the future value?</h3>

The future value shows the value that a present value will be in a future period, given the time value of money concept.

The future value can be computed using the future value formula, future value table, or an online finance calculator as below.

<h3>Data and Calculations:</h3>

Price of a car today = $25,000

Period to buy the car = 5 years

Inflation rate per year = 3%

Future value factor of 3% for 5 years = 1.159

Future price of the car in 5 years' time = $28,975 ($25,000 x 1.159)

N (# of periods) = 5 years

I/Y (Interest per year) = 3%

PV (Present Value) = $25,000

PMT (Periodic Payment) = $0

<u>Results:</u>

FV = $28,981.85

Total Interest $3,981.85

Thus, the future value of the car that costs $25,000 today in 5 years at an inflation rate of 3% per year is <u>$28,981.85.</u>

Learn more about future value computations at brainly.com/question/989421

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You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a ra
AlladinOne [14]

Answer:

62.5% and 37.5%.

Explanation:

The computation of percentage is shown below:-

Let us assume the X be the weight in Risky Asset

And, 1 - X is the weight in Risk Free asset.

SO,

Particulars         Rate          Weight         Weighted rate

Stock               11.00%            X                  0.11X

Risk free assets 3%            1 - X              0.03 - 0.03X

So, the equation will be

0.03 + 0.08 X = 0.08

0.08 X = 0.08 - 0.03

0.08 X = 0.05

X = 0.05 ÷ 0.08

= 0.625

8 0
4 years ago
An individual who makes $32,000 per year anticipates retiring in 30 years. If their salary is increased by $600 each year and th
Zepler [3.9K]

Answer:

$366,287.15

Explanation:

Annual salary = $32000  

No. of years (n) = 30 years

Increment in salary = $600

Deposit rate = 10%

Interest rate (r) = 7% or 0.07

Growth rate (g) = Increment in salary \div annual salary

Growth rate = $600 \ $32000

Growth rate = 0.01875

First deposit = $32000 x 10% = $3200

Future worth = [First deposit \ (r - g)] x [(1 + r)n - (1 + g)n]

Future worth = [$3200 \ (0.07 - 0.01875)] x [(1 + 0.07)30 - (1 + 0.01875)30]

Future worth = [$3200 \ 0.05125] x [(1.07)30 - (1.01875)30]

Future worth = $62439.0243902 x [7.6122550423 - 1.7459373366]

Future worth = $62439.0243902 x 5.8663177057

Future worth = $366287.15

Hence, the future worth at retirement is $366,287.15

7 0
3 years ago
In the office supply store, Brittany bought 17 pens of three kinds: ball pens, gel pens, and ink pens, which cost $0.05, $0.10 a
Ganezh [65]

Answer:

5 ball pens

Explanation:

Let's first assign our variables:

x = number of ball pens    = 0.05 each

y = number of gel pens    = 0.10 each

z = number of ink pens    = 0.25 each

We have three equations there:

She bought 17 pens so this means that if we add all the number of pens together we get 17.

The total cost is $2.05, so if we add the cost of the all the pens we would get $2.05.

Lastly, we know that she bought twice as many gel pens as ink pens.

We can then assume:

x + y + z = 17

0.05x + 0.10y + 0.25 z = 2.05

y = 2z

we will need to use all of these to figure out the number of ball pens:

x + y + z = 17

Substitute the equation we came up for y (y = 2z):

x + 2z + z = 17

x + 3z = 17

x = 17 - 3z

--------------------------

0.05x + 0.10y + 0.25 z = 2.05

0.05x + 0.10(2z) + 0.25z = 2.05

0.05(17-3z) + 0.20z + 0.25z = 2.05

0.85 - 0.15z + 0.20z + 0.25z = 2.05

Combine like terms:

0.85 + 0.3z = 2.05

Subtract both sides by 0.85

0.85 + 0.3z - 0.85 = 2.05 - 0.85

0.3z = 1.2

Divide both sides by 0.3

0.3z/0.3 = 1.2/0.3

z = 4

Now that we have the number of ink pens, let's solve the number of ball pens using one of the formulas we came up with.

x = 17 - 3z

x = 17 - 3(4)

x = 17 - 12

x = 5

If you want to check, just plug in everything that we know.

y = 2x

y = 2(4)

y = 8

---------

5 + 8 + 4 = 17

17 = 17

6 0
3 years ago
"i don't like to call it killing; i prefer to call it ‘enemy processing'" is an example of
klio [65]
Is this a question or what is this.
7 0
4 years ago
If the demand for textbooks is inelastic, then a decrease in the price of textbooks will
Dmitrij [34]

Answer:

decrease total revenue of textbook sellers. 

Explanation:

Demand is inelastic if a change in price has a very little effect on the quantity demanded.

If price is reduced, the quantity demanded of textbooks would change by a little amount, so total revenue would fall due to a reduction in the price of textbooks.

Total revenue = price × quantity

5 0
4 years ago
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