Purchasing Power The purchasing power (real valueof money) decreases if inflation is present in the economy. For example, the purchasing power of R dollarsafter t years of 5% inflation is given by the modelP = R(0.95t) dollarsa. What will be the purchasing power of $40,000after 20 years of 5% inflation?b. How does this affect people planning to retire atage 50?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Purchasing Power The purchasing power (real value
of money) decreases if inflation is present in the economy. For example, the purchasing power of R dollars
after t years of 5% inflation is given by the model
P = R(0.95t) dollars
a. What will be the purchasing power of $40,000
after 20 years of 5% inflation?
b. How does this affect people planning to retire at
age 50?

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