If salary must double every 7 yrs to keep up w/ iinflation, find inflation rate.

[juriemagic 1]

Hi good people!,
My fist time here, so, hello everyone!.

Please help me with this little problem: If your salary has to double every 7 years to keep up with inflation, what is the yearly inflation rate if salaries increase yearly?

Any and all help will be greatly appreciated!..

 

[Deleted member 4993]

Hi good people!,
My fist time here, so, hello everyone!.

Please help me with this little problem: If your salary has to double every 7 years to keep up with inflation, what is the yearly inflation rate if salaries increase yearly?

Any and all help will be greatly appreciated!..

Is this a question from:

math class (where you are expected derive the equation) or

a finance class (where you are expected to use a given equation)?

 

[stapel]

If your salary has to double every 7 years to keep up with inflation, what is the yearly inflation rate, if salaries increase yearly?

They gave you a compounded-growth formula, along the lines of the following:

. . . . .\(\displaystyle A\, =\, P\,\left(1\, +\, \dfrac{r}{n}\right)^{nt}\)

...where A is the ending amount, P is the beginning amount, r is the growth rate per growth period (usually, a s in this case, one year), n is the number of compoundi ngs per growth period, and t is the number of periods.

You have been given that, whatever the beginning amount was, the ending amount needs to be twice this. So how can you express the ending amount in terms of the beginning amount?

If the salaries are increased "yearly", how many compoundings occur in one year?

If the period over which salaries must double is seven years, what is the number of periods?

When you plug the given values into the given formula and solve for the remaining variable, what do you get?

If you get stuck, please reply showing your work and reasoning for each of the above steps. Thank you!