1) You plan to live in your house for 20 years, and your 20 year mortgage (principle and interest only) is $2,100/month. If you expect inflation to average 3% annually, what is your constant dollar mortgage payment on the day of your last payment?

2) Currently you can purchase a used 10 year old CAT 24D for $85,000. Ten years from now, you think that a comparable used machine will sell for $105,000. What is the average annual inflation rate on used equipment that you are expecting during this 10 year period?

3) Using the CPI-U table on the website www.bls.gov, look up the CPI-U index for April 2015 (all items). The CPI-U index for April 1990 was 128.9. If the starting salary of an engineer in April 1990 was $30,000, how much would that starting engineer likely make today? April 2015 CPI-U_____________ Answer_________________

4) Assume that you borrow $15,000 for five years (annual payments) at a market rate of 5%. Assuming that inflation is 3.5%, what would the equivalent equal annual payment be in constant dollars?