Homework Help: math

Posted by jacque on Thursday, November 29, 2012 at 9:11pm.

Suppose an insurance agent offers you a policy that will provide you with a yearly income of $120,000 in 30 years. What is the comparable annual salary today, assuming an inflation rate of 2%?. (Round your answer to the nearest cent.)

math - Donnie, Thursday, November 29, 2012 at 9:18pm
Hi Jacque,

You are looking for the present value of this investment, so...

Interest = principal x rate x time

I = 120,000 x .02 x 1 [which is what it's worth at year 1]

i= $24,000

Good luck,

Donnie
nope ! - math - Reiny, Thursday, November 29, 2012 at 9:24pm
No insurance company works with simple interest over 30 years

let the equivalent current salary be x

x(1.02)^30 = 120 000
x = 120000/1.02^30 = $66, 248.51
math - Donnie, Thursday, November 29, 2012 at 9:28pm
u r right
it's compound interest, not simple.

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