Suppose Julie's salary went from $35,000 to $150,000 in 12 years. a. Assuming she got the same percentage raise each of those five years, show how to calculate that rate (r%). b. Assuming that inflation was about 3% per year for those five years, by what percent did Julie's "purchasing power" increase? Explain what you think "purchasing power" means.

Suppose Julie's salary went from $35,000 to $150,000 in 12 years. a. Assuming she got the same percentage raise each of those five years, show how to calculate that rate (r%). b. Assuming that inflation was about 3% per year for those five years, by what percent did Julie's "purchasing power" increase? Explain what you think "purchasing power" means.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 16PROB

See similar textbooks

Similar questions

a. Inflation is expected to average 4% for the long term and Mr. Smith earned $74,000 this year, how much must he earn in 20 years just to keep up with inflation and maintain the balance between his income and his increasing expenditures?
Laureen Mauer’s salary a yearago was $52,000. If inflation during theyear was 3.5 percent in Tampa whereshe lives, how much of a decline in herpurchasing power occurred? Also, whatwould be her purchasing power if deflationof 1 percent occurred?
Lauren Mauer's salary a year ago was $52,000. If inflation during the year was 3.5 percent in Tampa where she lives, how much of a decline in her purhasing power occurred? Also, what would be her purchasing power if deflation of 1 percent occurred?
A university graduate earns a starting salary of $50,000 per year, and expects to receive a 5% increase in salary in each of the next 4 years. If the inflation rate is 5% during the 4 years, what will be her real income in terms of today’s dollars at the end of 4 years? a. $55,987.32 b. $60,000.00 c. unchanged, $50,000 d. $63,123.85
Inflation is expected to be 4% in the coming year. If Mr. Gonzo earned 37,000 this year how much must he earn in the following year to keep up with inflation and maintain a balance between his income and his increasing Expenditures.
Carmen Santiago decided to invest $12,000 in shares of the AT&T company that pays her 5% in dividends each year. In 5 years, she will sell the shares for market value, which she estimates will have increased in value by 1% of their original value. The combined marginal tax rate she applies is 39%. If the inflation rate is 6%, DETERMINE: The internal rate of return before taxes, ignoring inflation
Katie recently retired and met with her financial planner. She arranged to receive $45,000 the first year. Because of inflation each year she will get $580 more than she received the previous year. A. What income will she receive in her 11th year of retirement? B. How much money will she have received in total during her first 11 years of retirement?
Imagine that Homer Simpson actually invested the $120,000 he earned providing Mr. Burns entertainment 9 years ago at 6.5 percent annual interest and that he starts investing an additional $2,400 a year today and at the beginning of each year for 15 years at the same 6.5 percent annual rate. How much money will Homer have 15 years from today?
I received an increase salary from 35000 a year to 37000 a year. If inflation is 5% a year was i financially better off this year or last year?
Suppose Jennifer deposits $500 in an account at the end of this year. $400 at the end of the next year, and $300 at the end of the following year. If her opportunity cost rate is 7.5 percent, (a) how much will be in the account immediately after the third deposit is made? (b) How much will be in the account at the end of three years if the deposits are made at the beginning of each year?
Imagine that Homer Simpson actually invested the $160,000 he earned providing Mr. Burns entertainment 9 years ago at 9 percent annual interest and that he starts investing an additional $2,400 a year today and at the beginning of each year for 5 years at the same 9 percent annual rate. How much money will Homer have 5 years from today? The amount of money Homer will have 5 years from now is
Suppose that an investor opens an account by investing $1,000. At the beginning of each of the next four years, he deposits an additional $1,000 each year, and he then liquidates the account at the end of the total five-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: −9 percent, 17 percent, 9 percent, 14 percent, and −4 percent. Determine what the investor’s actual dollar-weighted average return was for this five-year period. I know the calculation of Arithmetic returns is 5.40% and Geometric returns 4.90%.