## Assume inflation is a constant 4% per year What effect does that have on the “real” eventual amount?

Poulation Growth and Sum of annuities

Consider the formula P = 6738 * (1026)^t If we let P
represent the population of Mexico in year t where t is the number of years
from 1980, confirm that this formula gives the same population values as those
given in the table

The following table gives the estimated population years
1980 to 1986

Year Population in Millions

1980 6738

1981 6913

1982 7093

1983 7277

1984 7466

1985 7660

1986 7859

b What would the population in 1990 have been if growth had
continued in this same pattern?

c How many years beyond 1980 will it take to double the
population assuming the growth continues in the same pattern?

The effect of inflation

a What is the future value of saving \$3000 per year at 10%
per year interest, for 20 years, assuming reinvestment of interest at the same
rate

b Assume inflation is a constant 4% per year What effect
does that have on the “real” eventual amount?

c If inflation continues at 4% per year what will the
“real value” of a dollar be in 20 years?

d If inflation is 10% per year what will the “real
value” of a dollar be in 20 years

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