SOLUTION: A man invested Php 130,000 at an interest rate of 10% compounded annually. What will be the final amount of his investment in terms of today's peso after 5 years if inflation remai

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Question 1172775: A man invested Php 130,000 at an interest rate of 10% compounded annually. What will be the final amount of his investment in terms of today's peso after 5 years if inflation remains the same at the rate of 8% per year?
Please show the solution.
Answer by ikleyn(52810) About Me  (Show Source):
You can put this solution on YOUR website!
.

            I solve this problem in two steps : 


1)  Without accounting for inflation,  Php 130,000 compounded annually at 10% annual interest rate become


        130000%2A%281%2B0.10%29%5E5 = 209,366.30 today's peso.



2)  Accounting for 8% average annual inflation, these 209,366.30 peso actually will be equivalent only


        209366.30%2F%28%281%2B0.08%29%5E5%29 = 142,491.19 today's peso.    ANSWER

Solved.