Answer:
$88,321.59
Explanation:
Assuming that inflation remains constant at a rate of 2% over 40 years, this problem can be treaded as an annually compounded interest problem, with a principal of $40,000 at a 2% per year rate for 40 years.
The equivalent annual income (E) adjusted for inflation is given by:
[tex]E= P*(1+r)^t\\E= 40,000*(1+0.02)^{40}\\E=\$88,321.59[/tex]
In 40 years, the equivalent retirement income will be $88,321.59.
