Financial Planning and Forecasting

1.      What annual deposit is required for 5 years to accumulate an amount of money with the same purchasing power as $680.58 today, if the market interest rate is I 0% per year and inflation is 8% per year?

2.      Describe how to convert inflated dollars into constant-value dollars.

3.      What is the inflation rate if something costs exactly twice as much as it did 1O years earlier?

1.      Convert $10,000 present dollars into then-current dollars of year 10 if the inflation rate is 7% per year.

2.      Convert $ 1 0,000 future dollars in year 10 into constant- value dollars (not equivalent dollars) of today if the inflation adjusted (market) interest rate is J 1 % per year and the inflation rate is 7% per year.

Solution:

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