Suppose that your salary is $35,000 in year one, will increase at 6% per year through year 4, and is expressed in actual dollars as follows: End of Year Salary (A$) 1 $35,000 2 37,100 3 39,326 4 41,685 If the general price inflation is expected to average 8% per year for the first two years and 7% per year for the last two years, A. What is the salary in real terms year 2? B. What is the % of increase in real terms from year 1 to year 2? (expressed in decimals)
Suppose that your salary is $35,000 in year one, will increase at 6% per year through year 4, and is expressed in actual dollars as follows: End of Year Salary (A$) 1 $35,000 2 37,100 3 39,326 4 41,685 If the general price inflation is expected to average 8% per year for the first two years and 7% per year for the last two years, A. What is the salary in real terms year 2? B. What is the % of increase in real terms from year 1 to year 2? (expressed in decimals)
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 15PROB
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Question
Suppose that your salary is $35,000 in year one, will increase at 6% per year through year 4, and is expressed in actual dollars as follows:
End of Year |
Salary (A$) |
1 |
$35,000 |
2 |
37,100 |
3 |
39,326 |
4 |
41,685 |
If the general price inflation is expected to average 8% per year for the first two years and 7% per year for the last two years,
A. What is the salary in real terms year 2?
B. What is the % of increase in real terms from year 1 to year 2? (expressed in decimals)
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