Poulation Growth and Sum of annuities
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Consider the formula P = 67.38 * (1.026)^t . If we let P represent the population of Mexico in year t where t is the number of years from 1980, confirm that this formula gives the same population values as those given in the table.
The following table gives the estimated population years 1980 to 1986
Year Population in Millions
1980 67.38
1981 69.13
1982 70.93
1983 72.77
1984 74.66
1985 76.60
1986 78.59
b. What would the population in 1990 have been if growth had continued in this same pattern?
c. How many years beyond 1980 will it take to double the population assuming the growth continues in the same pattern?
The effect of inflation
a. What is the future value of saving $3000 per year at 10% per year interest, for 20 years, assuming reinvestment of interest at the same rate.
b. Assume inflation is a constant 4% per year. What effect does that have on the "real" eventual amount?
c. If inflation continues at 4% per year what will the "real value" of a dollar be in 20 years?
d. If inflation is 10% per year what will the "real value" of a dollar be in 20 years.
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Solution Summary
There are two problems. Solution to first problem calculate the population in the given year and time it will take to double the population. Solution to second problem describes the steps to calculate future value of an annuity. It also discusses the relation between real value and inflation.
Solution Preview
Please refer attached file for better clarity of tables. Formulas typed with the help of equation writer are missing here.
Solution:
Year t P=67.38*(1.026)^t
1980 0 67.38*(1.026)^0=67.380
1981 1 67.38*(1.026)^1=69.132
1982 2 67.38*(1.026)^2=70.929
1983 3 67.38*(1.026)^3=72.773
1984 4 67.38*(1.026)^4=74.666
1985 5 67.38*(1.026)^5=76.607
1986 6 67.38*(1.026)^6=78.599
The above table is ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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