Suppose you'll have an annual nominal income of $20,000 for each of the next three years, and the Hint: Present value = Future value ÷ (1 + Growth in prices) Real value of next year's income = Next year's income ÷ (1+ Growth in prices) Instructions: Round your responses to the nearest whole dollar. a. Find the real value of your $20,000 salary for each of the next three years. Year 1: $ Year 2: $ Year 3: $ b. If you have a COLA in your contract, what is the real value of your salary for each year? Year 1: $ 19047 Year 2: $ 18144 Year 3: $ 17276

Suppose you'll have an annual nominal income of $20,000 for each of the next three years, and the Hint: Present value = Future value ÷ (1 + Growth in prices) Real value of next year's income = Next year's income ÷ (1+ Growth in prices) Instructions: Round your responses to the nearest whole dollar. a. Find the real value of your $20,000 salary for each of the next three years. Year 1: $ Year 2: $ Year 3: $ b. If you have a COLA in your contract, what is the real value of your salary for each year? Year 1: $ 19047 Year 2: $ 18144 Year 3: $ 17276

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

Suppose that the interest rate is 4 percent. Instructions: Enter your answers rounded to 2 decimal places. a. What is the future value of $100 four years from now? $ How much of the future value is total interest? $ b. By how much would total interest be greater at an interest rate of 6 percent than at an interest rate of 4 percent? %24
You borrowed $200 and repaid $211 at the end of the year. During the year, inflation was 0.7%. What was the real interest rate, in percent? (Please use the Fisher effect to approximate your answer if appropriate.) Round to one decimal place digit and do not enter the % sign. If your answer is 6.14%, enter 6.1. If your answer is 6.16%, enter 6.2. If appropriate, remember to enter the-sign 4.8
Suppose the nominal rate of interest on a savings account is 15%, the real rate of interest is 3%, and the tax rate on nominal interest is 20%. Which of the following is true? A saver would lose 9% real interest. A saver would neither gain nor lose real interest. A saver would earn 12% real interest. A saver would earn 2.4% real interest.
D Your pension is $8,000 per month when you retire. In the first year after you retire, inflation is 2%. In the next year, inflation is 1%. If your pension is indexed to inflation, what is the nominal value of your monthly pension after this second year, in dollars? Remember: Round to whole cents, and do no enter the dollar sign. If the answer is $93.625, enter 93.63. 8.241.6
the nominal rate on a $1,000 investment is 12.75 percent. the expected rate of inflation is 2.25 percent. find the exact expected real rate of interest .
2 0 0 1 2 3 4 5 6 7 8 Year According to the graph in the figure above, which year experienced the most rapid change in employment? Year 3 Year 5 Year 4 Year 2 Employment (in millions) 5
Harper is a short-lived human who only lives for two years: current year and next year. In the current year, Harper has an income of $189 and has to pay $36 in taxes. Harper expects that he can receive an income of $132 and has to pay $27 in taxes next year before he dies. The real interest rate between current and next year is 7%. What is Harper's lifetime wealth (in $)? Round your answer to at least 2 decimal places
Suppose Poornima is an avid reader and buys only comic books. Poornima deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a comic book is priced at $15.00. Initially, the purchasing power of Poornima's $3,000 deposit is comic books. For each of the annual inflation rates given in the following table, first determine the new price of a comic book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Poornima's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest comic book. For example, if you find that the deposit will cover 20.7 comic books, you would round the purchasing power down to 20 comic books under the assumption that Poornima will…
1. Calculate the following:a) real interest rate if expected inflation is 3% and nominal interest rate is 2%,b) real interest rate if nominal interest rate is 50% and expected inflation is 44%c) nominal interest rate if expected deflation is -5% and real interest rate is 5% 2. You want to sell your bond that has a par value of ₱100,000 plus a 5 percent annual coupon rate that will mature after one year. The prevailing interest rate is 8%. Will you be able to sell your bond for ₱100,000 or higher? Explain
John has nominal wealth of $100,000. He wants to invest his wealth in money (a chequing account) and government bonds such that he invests $50,000 in bonds and $5,000 more in bonds for every percentage point that the interest rate on bonds (i) exceeds that interest rate on his chequing account (i"). 1. Derive an algebraic formula that describes John's nominal demand for bonds (B°)? 2. Derive an algebraic formula to describe John's nominal demand for money (Mª) as a function of bonds and the interest rate on the chequing account. 3. Solve for the sum of John's nominal demand for money and nominal demand for bonds. 4. Suppose that John is a representative consumer of all individuals in the economy, that the fixed asset supplies per person are $80,000 of bonds and $20,000 of chequing accounts, and the chequing accounts do not pay interest. What is the interest rate on bonds at asset market equilibrium? a. Solve using the money market condition. b. Solve using the asset market condition.…
Some friends of yours have just had a child. Thinking ahead, and realizing the power of compound interest, they are considering investing for their child's college education, which will begin in 18 years. Assume that the cost of a college education today is $125,000. Also assume there is no inflation and no tax on interest income used to pay college tuition and expenses. Instructions: Enter your responses rounded to the nearest dollar. Do not round intermediate calculations. a. If the interest rate is 5 percent, how much money will your friends need to put into their savings account today to have $125,000 in 18 years? They would need to put $ 36982.9 into their savings account today. b. What if the interest rate were 7 percent? They would need to put $ into their savings account today. c. The chance that the price of a college education will be the same 18 years from now as it is today seems remote. Assuming that the price will rise 3 percent per year, and that today's interest rate is…
help