math

posted by .

Inflation is running 2% per year when you deposit $1000 in an account earning interest of 13% per year compounded annually. In constant dollars, how much money will you have two years from now? (Hint: First calculate the value of your account in two years' time, and then find its present value based on the inflation rate. Round your answer to the nearest cent.)
$ 1

  • math -

    The instructions in your questions tell you how to do it.
    Give it a try.

  • math -

    first part?1276.9

  • math -

    final answer?1225.82?

  • math -

    first part:
    1000(1.13)^2 = 1276.90

    You are right.

    Second part:
    1276.90(.98)^2 = 1226.33

    One step calculation:
    1000(.98)^2(1.13)^2 = 12236.33

    How did you get 1225.82 ?

  • math -

    I multipied first part times .02 and subtracted that twice

  • math -

    wheres the .98 from?

  • math -

    the answer was wrong

  • math -

    Just like when money increases by 1+i,
    when the money decreases you would take 1-i
    in this case i = .02
    so value(1-.02)^2

    when the rate was 13% did you not take 1 + .13 ?

    suppose we do it step by step

    start with 1000
    that loses 2% so amount left = .98(1000) = 980
    that gains 13%, so 980(1.13) = 1107.40

    that loses 2% , so amount left = 1107.4(.98) = 1085.25
    which gains 13% , 1085.25(1.13) = 1226.33

  • math -

    you said you multiplied your answer by 2% and then subtracted it twice ...

    let's try that

    2% of 1276.90 = 25.54
    leaving 1251.36

    2% of 1251.36 = 25.03
    subtracting that leaves 1226.33

    Well, well, what do you say now?

  • math -

    i put that answe ina and it was wrong

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Pre-Calculus

    What is the present value of a $1000 bond which pays $50 a year for 10 years, starting one year from now?
  2. economics

    In order to have money for their daughter's college education, a young couple started a savings plan into which they made intermittent deposits. They started the account with a deposit of 128.44 dollars (in year zero) and then added …
  3. math models

    Tanisha wants to have $1000 in her bank account in 5 years. How much money should she deposit if her account earns 6% interest which is compounded 2 times per year?
  4. maths

    You deposit $1000 each year into an account earning 8% compounded annually. a. How much will you have in the account in 10 years?
  5. Economics

    Ben deposits $5000 now into an account that earns 7.5 percent interest compounded annually. He then deposits $1000 per year at the end of the first and second years. How much will the account contain 10 years after the initial deposit?
  6. math

    Jeanette wishes to retire in 30 years at age 55 with retirement savings that have the purchasing power of $300,000 in today‚Äôs dollars. 1. If the rate of inflation for the next 30 years is 2% per year, how much must she accumulate …
  7. magh

    suppose you put money into teo different bank accounts. In account #1 you deposit $500 and you will be earning 6% interest compounded quarterly. in account #2 you deposit $600 and you will be earning 5% interest compounded annually. …
  8. Annuities

    You deposit $4000 each year into an account earning 6% interest compounded annually. How much will you have in the account in 30 years?
  9. Deposit

    You deposit $3000 each year into an account earning 2% interest compounded annually. How much will you have in the account in 35 years?
  10. math 107

    You deposit $4000 each year into an account earning 6% interest compounded annually. How much will you have in the account in 30 years?

More Similar Questions