Question

Suppose an insurance agent offers you a policy that will provide you with a yearly income of $120,000 in 30 years. What is the comparable annual salary today, assuming an inflation rate of 2%?. (Round your answer to the nearest cent.)

Answer 1

Hi Jacque,

You are looking for the present value of this investment, so...

Interest = principal x rate x time

I = 120,000 x .02 x 1 [which is what it's worth at year 1]

i= $24,000

Good luck,

Donnie

Answer 2

No insurance company works with simple interest over 30 years

let the equivalent current salary be x

x(1.02)^30 = 120 000
x = 120000/1.02^30 = $66, 248.51

Answer 3

u r right
it's compound interest, not simple.