Suppose your salary in 2015 is $40,000. Assuming an annual inflation rate of 8%, what salary do you need to earn in 2020 in order to have the same purchasing power? (Round your answer to two decimal places.)

40000(1+.08)^5

Good luck with that!

To calculate the salary you need to earn in 2020 in order to have the same purchasing power as $40,000 in 2015, you will need to adjust for inflation. Here's how you can calculate it step-by-step:

Step 1: Calculate the inflation factor:
Inflation Factor = (1 + inflation rate) ^ number of years

In this case:
Inflation Rate = 8% = 0.08
Number of Years = 2020 - 2015 = 5

Inflation Factor = (1 + 0.08) ^ 5 = 1.46933 (rounded to five decimal places)

Step 2: Divide the target salary by the inflation factor to find the adjusted salary:
Adjusted Salary = Target Salary / Inflation Factor

In this case:
Target Salary = $40,000

Adjusted Salary = $40,000 / 1.46933 = $27,227.84 (rounded to two decimal places)

Therefore, you would need to earn a salary of approximately $27,227.84 in 2020 in order to have the same purchasing power as $40,000 in 2015.

To determine the salary you would need to earn in 2020 to have the same purchasing power as your salary in 2015, we need to adjust for inflation.

The first step is to calculate the inflation factor from 2015 to 2020. The formula to calculate the inflation factor is:

Inflation factor = (1 + inflation rate)^number of years

In this case, the inflation rate is 8% and the number of years is 5 (from 2015 to 2020). Plugging those values into the formula, we have:

Inflation factor = (1 + 0.08)^5

Next, we multiply the inflation factor by your salary in 2015 to find the equivalent salary in 2020. In other words:

Equivalent salary in 2020 = Salary in 2015 * Inflation factor

Now let's calculate it step by step:

Inflation factor = (1 + 0.08)^5
= 1.4693 (rounded to four decimal places)

Equivalent salary in 2020 = $40,000 * 1.4693
= $58,772 (rounded to the nearest dollar)

Therefore, you would need to earn approximately $58,772 in 2020 to have the same purchasing power as your $40,000 salary in 2015.