If another Austin Powers movie had been released in 2007 and Dr. Evil now armed with a

QUESTION

If another Austin Powers movie had been released in 2007, and Dr. Evil, now armed with a financial calculator, wants to hold the Earth ransom for $7,039,988.71, what inflation rate would Dr. Evil use to make his ransom equivalent to $1 Million in 1967 (Hint: Inflation is compounded on an annual basis). Round to the nearest 1%.
Solution: For Dr. Evil: Future Value = $7039988.71 Present value = $1000000 Time Period = 40 Years (1967 to 2007) Future Value = Present

lue*(1+Inflation Rate)^n $7039988.71 = $1000000*(1+Inflation Rate)^40 So, Inflation Rate = 5%

ANSWER:

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