Suppose that an insurance agent offers you a policy that will provide you with a yearly income of $149,500 in 20 years. What is the comparable annual income today, assuming an inflation rate of 6%?
A) $\$ 46,614.81$
B) $\$ 45,163.37$
C) $\$ 140,806.44$
D) $\$ 494,875.57$
E) $\$ 479,466.75$

Question

Quizplus · Accepted Answer

To find the equivalent value today of a future income, considering inflation, we use the formula for the present value of a single future amount: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value ($149,500), $r$ is the annual inflation rate (6% or 0.06), and $n$ is the number of years (20). Plugging in the values: $PV = \frac{149,500}{(1 + 0.06)^{20}}$, which calculates to approximately $46,614.81.

Suppose That an Insurance Agent Offers You a Policy That $46,614.81\$ 46,614.81$46,614.81

Suppose That an Insurance Agent Offers You a Policy That $\$ 46,614.81$