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Elis [28]
1 year ago
11

Suppose your salary in 2012 is $70,000. Assuming an annual inflation rate of 7%, what salary do you need to earn in 2020 in orde

r to have the same purchasing power? (Round your answer to two decimal places.)
Physics
1 answer:
s2008m [1.1K]1 year ago
8 0

Annual salary(2012) = $70,000

Annual inflation = 7%

Therefore, the salary you need to earn in 2020 in order to have the same purchasing power can be calculated below

2020-2012=8\text{ years}FV=PV\times(1+r)^n

where

n = 8

r = 7/100 = 0.07

PV = 70, 000

\begin{gathered} FV=70,000(1+0.07)^8 \\ FV=70000(1.07)^8 \\ FV\text{ = 70000}\times1.71818617983 \\ FV=120273.032588 \\ FV=\text{  \$}120,273.03 \end{gathered}

The salary you need to earn in 2020 to have the same purchasing power = $120, 273.03

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