Suppose you’ll have an annual nominal income of $40,000 for each of the next three years, and the inflation rate is 5 percent pe

Question

3 years ago

11

Suppose you’ll have an annual nominal income of $40,000 for each of the next three years, and the inflation rate is 5 percent pe

r year.
a. Find the real value of your $40,000 salary for each of the next three years.
b. If you have a COLA in your contract, and the inflation rate is 5 percent, what is the real value of your salary for each year?

Mathematics

1 answer:

Rom4ik [11] · Answer 1 · 2022-07-01T05:51:34+03:00

Rom4ik [11]3 years ago

6 0

Year 1=40000
Year 2=40000*.95=38000
Year 3 = 40000*.95*.95=36100

Year 1=40000
Year 2 =40000*1.05*.95=39,900
Year 3=40000*1.05*1.05*.95*.95=39,800