Question

Omar's current annual salary is $75,000. How much will he need to earn 20 years from now to retain his present purchasing power if the rate of inflation over that period is 3%/year? Assume that inflation is continuously compounded. (Round your answer to the nearest cent.)

Answer 1

Answer:

amount = $136658.91

Explanation:

given data

current annual salary =  $75,000

time = 20 years

rate = 3%  = 0.03

to find out

amount

solution

we will apply here amount formula for continuously compounded that is express as

amount = Principal × $e^{rt}$   .......................1

put here value we get

amount = $75,000 × $e^{0.03*20}$

amount = $75,000 × 1.822

amount = $136658.91