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Upon graduating from college this year, you expect to earn $25,000 per year. If you get your MBA, in one year you can expect to start at $35,000 per year. Over the year, inflation is expected to be 5 percent. In today's dollars, how much additional (less) money will you make from getting your MBA (to the nearest dollar) in your first year?

Respuesta :

facundobuzzetti

Answer:

Income difference= $8,250

Explanation:

Giving the following information:

Actual salary= $25,000 per year

MBA salary= $35,000 per year.

Inflation rate= 5 percent.

We will separate the analysis. First, we will calculate the nominal increase. Then, the real increase based on purchasing power.

In nominal terms, the increase in income is equal to the difference between salaries.

Income increase= 35,000 - 25,000= $10,000 increase.

In real terms, we need to calculate the effect of inflation on your purchasing power.

Actual income= $25,000

MBA income= 35,000*0.95= $33,250

Income difference= $8,250

In other terms, the real purchasing power of the MBA income decreases. Therefore, the difference today between real salaries is lower than the nominal difference.

abiolataiwo2015

The additional (less) money you will make from getting your MBA is $8,333.

Additional money:

Using this formula

Additional money=Cost of expected MBA /(1+Expected Inflation rate)-Expected earning

Let plug in the formula

Additional money=$35,000/(1+0.05)-$25,000

Additional money=$35,000/(1.05)-$25,000

Additional money=$33,333-$25,000

Additional money=$8,333

Inconclusion the additional (less) money you will make from getting your MBA is $8,333.

Learn more additional money here:https://brainly.com/question/24556197

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