The cost of first-class postage has risen by about 5% per year over the past 30

Question

The cost of first-class postage has risen by about 5% per year over the past 30 years. The US Postal Service 42 cents for first-class postage (one ounce or less), and it will be valid as first-class postage regardless of all future price increases. Let's say you decided to purchase 2,000 of these stam ps for this one-time special rate. Assume 5% inflation per year over the next 30 years and your personal MARR is 9% per year ( introduced a one-time revers am n 2003 at cs Click the icon to view the interest and annuity table for discrete compounding when i 9% per year Click the icon to view the interest and annuity table for discrete compounding when 5% per year. The FW of 2,000 post stamps 30 years from now is (Round to the nearest dollar.) The FW of the cost of 2,000 stamps, provided you didn't buy them, 30 years from now is S(Round to the nearest dollar) Did you make a sound economical decision? Choose the correct answer below O No O Yes

Explanation / Answer

The FW of 2,000 post stamps 30 years from now is:

Cost of stamps = $0.42 x 2000 = $840

After 30 years = $840 (F/P,5%,30)

After 30 years = $840 (4.3219) = $3,630

The FW of the cost of 2,000 stamps, provided you didn’t buy them, 30 years from now is:

$840(F/P,9%,30)

$840 x 13.2677

$11,145

No, If we invest this sum of $840 at 9% for 30 years its value of $11,145 is more than value of stamps $3,630 at that time.

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