Question

Suppose your salary in 2012 is $70,000. Assuming an annual inflation rate of 7%, what salary do you need to earn in 2019 in order to have the same purchasing power? (Round your answer to two decimal places.)

Answer 1

Salary 2019= $112,404.7

Step-by-step explanation:

Giving the following information:

Salary 2012= $70,000

Inflation rate= 7%

Salary 2019= ?

To calculate the nominal value of your salary to maintain the purchasing power, we need to use the following formula:

FV= PV*(1+i)^n

FV= 70,000*(1.07^7)

FV= $112,404.7