Problem 07-05 Saved Suppose you'll have an annual nominal income of $40,000 for each of the next three years, and the inflation rate is 5 percent per year. Hint Present value = Future value = (1 + Growth in prices) Real value of next year's income = Next year's income = (1 + Growth in prices) Instructions: Round your responses to the nearest whole dollar a. Find the real value of your $40,000 salary for each of the next three years. Year 1: $1 Year 2: $ Year 3: $[ b. If you have a COLA in your contract, and the inflation rate is 5 percent, what is the real value of your salary for each year? Year 1: $[ Year 2: $ Year 3: $1

Supposis you'll have an annual nominal income of $,40,000 for eoch of the noxt three years, and the inflion rote is 5 percent per year Hirnt Present value - Future volue - (d-GrowthinDtices)t Real value of next yearts incomo - Noxt yours income - (1+Growthininces)t Instructions: Round yous responses to the nevatest whole dollar a find the real value of your $,40,000 sotary for each of the next threo yoars Vear15Vear2.5Year3$ Yoar 1 . 5 Yoor 2:$ Foar 3$