Question

An elderly couple has a fixed income of $3,700 per month.Assuming an inflation rate of 8% compounded annually what is the purchase power in dollars of their monthly income in five years round your answer to the nearest cent

Answer 1

Present value formula is given by:

`P=(A)/((1+(r)/(n))^(nt))`

Putting given values in equation:

`P\text{ = }\frac{3700}{(1\text{ + }(0.08)/(1))^(5*1)}`

So:

P = $2518.16