investment

Question

Graduating senior may earn $45,000. If the annual rate of inflation is 2 percent, what must these graduates earn after 20 years to maintain their current purchasing power?

Answer 1

2 percent annual inflation  ==>  earnings must increase 2% per year to maintain current purchasing power  

 

After 20 years graduates must earn 

 

45000*(1.02)²⁰ = 45000*1.4859474 = $66867.63