Expert: Sherry Wallin - 11/9/2010

Question
In the assignment I need to calculate the growth rate from current year to years in the future. It tells me as an example that : Avg Income in 100 years = 38,000 (current avg inc ) x ( 1 + 0.015)to the 100 th power where the growth rate is 1.5%  . the answr is 168,418.  I do not know how to calculate that. I dont get that answer with any of my attempts, how do I calculate this formula?  

Answer
Greg~

I'm not sure what you are doing but I will try to explain how you should be interpreting the information given:

1 + 0.015 is 1 plus 1.5% which when added is 1.015. You know you need to take that number to the power of 100 so (1.015)^100 = 4.432 and that will need to be multiplied by 38,000, so 4.432*38000 = 168416. If you do not round off 1.015^100 and multiply 1.015^100 * 38000 you get 168417.7347 which when rounded is 168418.

Math Prof