Upon graduating from college this year,you expect to earn $25,000 per year. If you get your MBA,in one year you can expect to start at $35,000 per year. Over the year,inflation is expected to be 5 percent. In today's dollars,how much additional (less)money will you make from getting your MBA (to the nearest dollar)in your first year?
A)−$2,462
B)$8,333
C)$8,750
D)$9,524
E)$10,000

Question

Quizplus · Accepted Answer

The correct answer is B.The additional money you will make from getting your MBA in your first year is $35,000 - $25,000 = $10,000. However, inflation is expected to be 5%, so the value of $10,000 in today's dollars is $10,000 / (1 + 0.05) = $9,523.81. Therefore, the additional money you will make from getting your MBA in your first year is $9,524 (to the nearest dollar).

Upon Graduating from College This Year,you Expect to Earn $25,000