You would like to have the current equivalent in terms of today's buying power of $2,500 in 10 years. how much would you have to invest today (in nominal terms) to fund this level of real consumption?
you expect inflation to be 5% per year over that time period. your investments earn 7% per year in nominal terms.

a. $2,112
b. $2,500
c. $1,271
d. $2,070

D. $2,070

Explanation:

First, convert $2500 real dollar amount at year 10 to  to nominal amount;

If inflation rate is 5% per year, then in 10 years the inflation will compound to the following;

1.05^ 10 = 1.6289

Therefore, the nominal amount of your savings would be

= $2500*1.6289

= $4,072.25

Next, that would be your future value( FV), find its present value using the 7% as the discount rate. On a financial calculator, input the following;

FV = 4,072.25

I/Y = 7%

N= 10

PMT = 0

then compute present value ; CPT PV = $2,070

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know