Question: Refer to Example. Suppose natural gas experiences a 1.8% increase per year in real terms over the foreseeable future. The cost of a 1,000 cubic feet of natural gas is now $7.50. (8.2)
a. What will be the cost in real terms of 1,000 cubic feet of natural gas in 22 years?
b. If the general price inflation rate (e.g., the CPI) for the next 22 years is expected to average 3.2% per year, what will a 1,000 cubic feet of natural gas cost in actual dollars 22 years from now?
Example: Future Value of a College Degree A recent government study reported that a college degree is worth an extra $23,000 per year in income (A) compared to what a high-school graduate makes. If the interest rate (i) is 6% per year and you work for 40 years (N), what is the future compound amount (F) of this extra income?