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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 -

    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 -

    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 -

    u r right
    it's compound interest, not simple.

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