Assume your uncle recorded his salary history during a 40-year career and found that it had increased 10-fold.If inflation averaged 4% annually during the period,then over his career his purchasing power:
A) remained on par with inflation.
B) increased by nearly 1% annually.
C) increased by nearly 2% annually.
D) decreased.

Question

Quizplus · Accepted Answer

FV = PV(1 + r)^t10 = 1(1 + i)⁴⁰r = 5.93%Real rate = (1.0593 / 1.04) − 1 = 0.0186, or 1.86%

Assume Your Uncle Recorded His Salary History During a 40-Year