# Assume inflation is a constant 4% per year What effect does that have on the “real” eventual amount?

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Poulation Growth and Sum of annuities
Consider the formula P = 6738 * (1026)^t If we let Prepresent the population of Mexico in year t where t is the number of yearsfrom 1980, confirm that this formula gives the same population values as thosegiven in the table
The following table gives the estimated population years1980 to 1986
Year Population in Millions
1980 6738
1981 6913
1982 7093
1983 7277
1984 7466
1985 7660
1986 7859
b What would the population in 1990 have been if growth hadcontinued in this same pattern?
c How many years beyond 1980 will it take to double thepopulation assuming the growth continues in the same pattern?
The effect of inflation
a What is the future value of saving \$3000 per year at 10%per year interest, for 20 years, assuming reinvestment of interest at the samerate
b Assume inflation is a constant 4% per year What effectdoes that have on the “real” eventual amount?
c If inflation continues at 4% per year what will the“real value” of a dollar be in 20 years?
d If inflation is 10% per year what will the “realvalue” of a dollar be in 20 years

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