A) The average rate of annual inflation over the last 50 years has been 4.14%.^[1] On a percentage basis, compare the purchasing power of your final amount to the purchasingpower of Monty's initial investment, over the entire 50 years. For example, if the final balance today allows you to buy 10% more stuff (coffees, peanut butter, or whatever) today than when Monty made his original investment, the answer would be 10%.

B) What is the present value of a 10-year annuity paying $2,000 per year at the end of each of the next 10 years if the 3^rd and 7^th payments are skipped (you only get 8 payments)? Use a discount rate of 9%.

^[1] To see how this is calculated, go to this website:

http://www.inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx. Note that the CPI (consumer price index) in April 1962 is 30.2. In March 2012, the comparable figure is 229.4. This means that 30.2 dollars in purchasing power would buy about the same amount as 229.40 dollars today. The average rate of growth over 50 years, therefore, is (229.4/30.2)^(1/50) = 1.0414, or 4.14 % on average.

Note: this question was originally written in 2012.

1/50) = 1.0414, or 4.14 % on average. Note: this question was originally written in 2012