a. Suppose you wanted to know in todays value how much money your grandparents earned each year. If your grandparents earned $3000 per year in 1954 and the inflation rate on average is 2%, how much would this $3000 be worth in 2020?

b. Suppose you have 2 alternative investments. Investment 1 is very safe; you can invest $1000 at a rate of 2% for the next 10 years. Investment 2 is very risky; you can invest your $1000 at a rate of 8%; however, there is a 50/50 chance you will receive nothing in the end. Which investment do you chose and why?

c. Suppose you are interested in purchasing an asset that costs $60,000, but you currently only have $45,000. If you can earn 6% compounded semi annually, how long will it take until you can afford to purchase the asset?