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mina [271]
3 years ago
15

Suppose the inflation rate is 2% per year. If you currently think of $40,000 as an acceptable retirement income and are expectin

g to retire in 40 years, what will the equivalent annual income then be, adjusted for inflation?
Business
1 answer:
AysviL [449]3 years ago
7 0

Answer:

$88,321.59

Explanation:

Assuming that inflation remains constant at a rate of 2% over 40 years, this problem can be treaded as an annually compounded interest problem, with a principal of $40,000 at a 2% per year rate for 40 years.

The equivalent annual income (E) adjusted for inflation is given by:

E= P*(1+r)^t\\E= 40,000*(1+0.02)^{40}\\E=\$88,321.59

In 40 years, the equivalent retirement income will be $88,321.59.

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3 years ago
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3 years ago
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