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If a person makes $30,000 in 2004 and the inflation rate is4% annually, how much is this salary worth in the year 2008 (in terms of 2004 dollars)?

  • math -

    30,000 * 0.04 = 1,200
    30,000 - 1,200 = $28,800

    That's how much it's worth in 2005. Repeat those steps for the next three years.

    $28,800 * 0.04 =

  • math -

    Is it $24,773?

  • math -

    I came up with 25,480.47.

    Check your figures -- and I'll check mine again and will repost If I'm wrong.

  • math -

    You are correct! I multiplied 28,000 instead of 28,800.

  • math -

    Actually, I found a minor discrepancy. I think the final answer should be #25,480.40

  • math -

    Nadia 23, miguel, etc etc. I interpret the problem a little differently than Ms. Sue.
    Here is how I see it.
    30,000*0.04 = 1200 and 30,000-1200 - 28,800 at the end of the first year.
    For year 2, the salary STILL is 30,000 (not 28,800); therefore, the 30,000*0.04 is another 1200 lost in purchasing power. Thus, 28,800 - 1200 = 27,600.
    For year 3, it is 27,600 - another 1200 = 26,400 and at the end of year 4 it is 26400 - 1200 = 25,200.
    As I read the problem, the salary stays the same at 30,000/year. The way Ms. Sue has solved it is that the salary is 30,000 only for the first year and it decreases for years 2-4.

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