Suppose you\'ll have an annual nominal income of $65,000 for each of the next 3

Question

Suppose you'll have an annual nominal income of $65,000 for each of the next 3 years, and the inflation rate is 5 percent per year (Hint Use the following formula): lo / (1 + n where lo is the nominal income, r is the inflation rate and t is the number of years. Instructions: Enter your responses rounded to two decimal places. (a) Find the real value of your $65,000 salary for each of the next 3 Year 1 $ Year 2: $ Year 3: $ years. Instructions: Enter your responses rounded to two decimal places (b) If you have a COLA in your contract and the inflation rate is 5 percent per year, what is 4 2 the real value of your salary of 65.000 for each year? Year 1: $ Year 2: $ Year 3 s

Explanation / Answer

(a) Year 1: $61,905

Year 2: $58,957

Year 3: $56,149

(b) Year 1: $65,000

Year 2: $65,000

Year 3: $65,000

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