If Inflation Is Increasing at 3 Percent Per Year,and Your

question 26

Multiple Choice

If inflation is increasing at 3 percent per year,and your salary increases at the same rate,how long will it take your salary to double?

• A)30 years
• B)24 years
• C)18 years
• D)12 years
• E)6 years Rule of 72: 72/3 = 24

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, including loans, bonds, or lines of credit.

Tax Expense

The total amount of taxes a company incurs on its taxable income, including federal, state, and local taxes.

Net Operating Income

A financial metric that calculates a company's profit after all operating expenses are subtracted from total revenue.

Residual Income

The net income an investment generates above a minimum required return.