Suppose an insurance agent offers you a policy that will provide you with a yearly income of $230,000 in 20 years. What is the comparable annual salary today, assuming an inflation rate of 3%?. (Round your answer to the nearest cent.)
Is Please Help the name of your subject?
Yes
Gee -- I must have failed "Please Help" when I was in school. I remember nothing about such a class.
Wow, pretty ignorant responses you have received. Would have taken less time to post the formula for the answer.
230,000/1.03^20=
To find the comparable annual salary today, we need to adjust the future income of $230,000 for inflation.
We can use the concept of present value and the inflation rate to calculate the comparable annual salary today. The formula for calculating present value is:
PV = FV / (1 + r)^n
Where:
PV = Present value (comparable annual salary today)
FV = Future value (annual income in 20 years)
r = Inflation rate (3% or 0.03)
n = Number of years (20)
Using this formula, we can substitute the given values into the equation:
PV = 230,000 / (1 + 0.03)^20
Now, let's calculate this:
PV = 230,000 / (1.03)^20
PV = 230,000 / 1.806
PV = 127,320.86
Therefore, the comparable annual salary today, rounding to the nearest cent, is $127,320.86.