# inflation and present value

Please develop a hypothetical scenario in a word document illustrating these concepts.

Inflation:

1. If your salary today is $55,000 per year, what would you expect your salary to be in 20 years (rounded to the nearest thousand dollars) if you assume that inflation will continue at a constant rate of 6% over that time period?

*note: Be sure to use parentheses for the exponent.

Present Value

2. Suppose that you want to take a trip to Tahiti in 5 years and you decide that you will need $5,000. To have that much money set aside in 5 years, how much money should you deposit now into a bank account paying 6% compounded quarterly?

Present Value

3. An insurance agent wishes to sell you a policy that will pay you $100,000 in 30 years. What is the value of this policy in today's dollars, if we assume a 9% inflation rate, compounded annually?

* Note using Polya's problem solving guidelines for this problem

4. Your first child has just been born. You want to give her 1 million dollars when she retires at age 65. If you invest your money on the day of her birth, how much do you need to invest so that she will have $1,000,000 on her 65th birthday?

#### Solution Preview

Please develop a hypothetical scenario in a word document illustrating these concepts.

Inflation:

1. If your salary today is $55,000 per year, what would you expect your salary to be in 20 years (rounded to the nearest thousand dollars) if you assume that inflation will continue at a constant rate of 6% over that time period?

*note: Be sure to use parentheses for the exponent.

You can solve this problem by finding the future value as follows: -

FV = PV (1+i)n where PV is the present value

FV is the future value ...

#### Solution Summary

This solution is comprised of a detailed explanation to calculate inflation and present value.