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Suppose that an insurance agent offers you a policy that will provide you with a yearly income of $40,000 in 30 years. What is the comparable salary today, assu

Suppose that an insurance agent offers you a policy that will provide you with a yearly income of $40,000 in 30 years. What is the comparable salary today, assuming an inflation rate of 5% compounded annually? (Round your answer to the nearest cent.)
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1 Answer

Donna,
 
FV=PV*(1+i)n where FV= the future value, PV=the present value, i=the interest rate and n= the number of years. Putting all the numbers in gives.
 
FV=40,000*(1.05)30 =$40,000*4.3219=$172,877.70
 
Jim