42 years ago the maximum earnings of a worker subject to Social Security tax (SST) was $11,000. The maximum earnings subject to SST now is $117,200. What compoundannual increase has been experienced over this 42-year period of time? How does it compare with a 3% annual increase in the consumer price index over the same periodof time?The compound annual increase in SST over 42 years is %. (Round to two decimal places.)The increase in SST over 42 years isthe 3% annual increase in the consumer price index.

The objective of the question is to calculate the compound annual growth rate (CAGR) of the maximum…

Answered: 42 years ago the maximum earnings of a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

You are just retired, You pension company promised you that they will pay you $25,000 a year for 30 years. The first payment you will receive is a year from now. The market interest rate is 5% per year. a) What is the present value of you pension if the payment you receive will be the same for 30 years? b) What is the present value of your pension if the payment you receive will grow 3% per year to combat inflation?
1. Sally Johnson loaned a friend $10,000 at 15% interest, compounded annually. The loan will be paid in four equal end-of-year payments. Sally expects the inflation rate to be 3%. After taking inflation into account, what rate of return is Sally receiving on the loan? Compute your answer to the nearest 0.1%.
Sally will earn $30,000 this year and $40,000 next year. The real interest rate is 20% between this year and next year; she can borrow or lend at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. The inflation rate is 0%. (a) How much should Sally save this year? How much will Sally consume in each of the two years? (b) How would your answers change if the real interest rate was 40% ?
Omar's current annual salary is $54,000. How much will he need to earn (in dollars) 10 years from now to retain his present purchasing power if the rate of inflation over that period is 2%/year? Assume that inflation is continuously compounded. (Round your answer to two decimal places).
An inflation-adjusted pension provides for continuous payments over the next 10 years at the rate of 20,000 e dollars per year t years from now. Suppose the applicable interest rate is 4% p.a. compounded continuously over the next 10 years. Find the present value of this pension, and also find the total dollars that is paid out. PV = Total paid out =
Jack received a $4,000 raise this year; this increased his salary as an associate television producer from $35,500 to $39,500. What percentage increase in nominal income did Jack receive? 14.6 percent 11.3 percent 10.1 percent 8.2 percent
Goods costing $27.10 at the beginning of the year 1940 cost $176.52 at the beginning of the year 1979. Find the average annual inflation rate over this time period. Express your answer the nearest thousandth of a percent.
Suppose you think if you were to retire right now, you would have needed $50,000 each year to supplement your social security and maintain your desired lifestyle. But because there is on average 3% annual inflation, when you retire 30 years from now, you need more than $50,000 per year to maintain the lifestyle you like. How much will be equivalent to $50,000 at retirement time when adjusted for inflation? What will be the face value of the bond that yields the equivalent of $50,000, found in #4 of Part B in coupon payment? How much annual payment in the retirement account is needed to accumulate the amount needed to purchase the bond when retiring? What is the purchase power of the amount that will be received by your inheritors, measured in the current value of $ at the time of opening the retirement account? (Hint: First calculate what the future value will be in 30 years, which is equivalent to $50,000 now and then solve the rest of the problem).
Over the last 10 years, the average rate of inflation has been 1.51%. What is thepurchasing power of a dollar today in terms of what a dollar could purchase in 2012?
A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals. Years until retirement: 30 Amount to withdraw each year: $120,000 Years to withdraw in retirement: 25 Interest rate: 7.5% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. Assume that the inflation rate is 3%. Consequently, when your friend retires she will want to withdraw $120,000 each year in today’s dollars. What amount is she planning to receive in year 31 (the end of her first year of retirement)?
Assume Medet decided to buy a car. His friend Aidar has lent him $10,000 USD. Medet and Aidar agree that Aidar should earn a real return of $5 percent per year. Enter your responses rounded to two decimal places. (a). The CPI (times 100) is 100 at the time that Frank makes the loan. It is expected to be $111 in one year and $128 in two years. What nominal rate of interest should Aidar charge Medet? The nominal rate of interest charged should be % in year 1. The nominal rate of interest charged should be % in year 2. (b). Suppose Aidar and Medet are unsure about what the CPI will be in one year. How should Aidar and Medet's annual repayments ensure that he gets an annual $5 percent rate of return? Aidar should charge Medet % more than the inflation rate.
What are the benefits of inflation indexation in fixed income products? Why is it important for retirees? What is the cost for having inflation indexation as a product feature?

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS