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Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this in a folder with some of their papers. Assume that the inflation rate between that time and 2019 was 3.56%. At the time that the money was placed in the envelope, the coupon rate on U.S. treasury bonds was 4%. Since that time, the stock market has experienced gains at an average annual rate of 7%. a) What is the 1954 real dollar equivalent ($) of the current sum of $1,000?

Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this in a folder with some of their papers. Assume that the inflation rate between that time and 2019 was 3.56%. At the time that the money was placed in the envelope, the coupon rate on U.S. treasury bonds was 4%. Since that time, the stock market has experienced gains at an average annual rate of 7%. a) What is the 1954 real dollar equivalent ($) of the current sum of $1,000?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this in a folder with some of their papers. Assume that the inflation rate between that time and 2019 was 3.56%. At the time that the money was placed in the envelope, the coupon rate on U.S. treasury bonds was 4%. Since that time, the stock market has experienced gains at an average annual rate of 7%. a) What is the 1954 real dollar equivalent ($) of the current sum of $1,000? b) How much would $1,000 invested in the stock market in 1954 be worth in today's dollars ($)? c) What is the inflation-adjusted dollar amount ($) in 2019 that is equivalent to $1,000 in 1954?
Transcribed Image Text:Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this in a folder with some of their papers. Assume that the inflation rate between that time and 2019 was 3.56%. At the time that the money was placed in the envelope, the coupon rate on U.S. treasury bonds was 4%. Since that time, the stock market has experienced gains at an average annual rate of 7%. a) What is the 1954 real dollar equivalent ($) of the current sum of $1,000? b) How much would $1,000 invested in the stock market in 1954 be worth in today's dollars ($)? c) What is the inflation-adjusted dollar amount ($) in 2019 that is equivalent to $1,000 in 1954?
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