1. Suppose you’ll have an annual nominal income of $40,000 for each of the next 3 years, and the inflation rate is 5 percent per year. a. Find the real value of your $40,000 salary for each of the next 3 years. b. Suppose you have a COLA (Cost of Living Adjustment) of 5 percent per year in your contract, which raises your $40,000 salary by 5 percent for each of the next 3 years. Given the 5 percent inflation rate for each of those 3 years, what is the real value of your salary for each year?

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