Question

Omar's current annual salary is $75,000. How much will he need to earn 20 years from now to retain his present purchasing power if the rate of inflation over that period is 3%/year? Assume that inflation is continuously compounded. (Round your answer to the nearest cent.)

Answer 1

amount = $136658.91

Step-by-step explanation:

given data

current annual salary = $75,000

time = 20 years

rate = 3% = 0.03

to find out

amount

solution

we will apply here amount formula for continuously compounded that is express as

amount = Principal ×
`e^(rt)` .......................1

put here value we get

amount = $75,000 ×
`e^(0.03*20)`

amount = $75,000 × 1.822

amount = $136658.91