Question

A family spends $40,000 a year for living expenses. If prices increase by 4 percent a year for the next three years, what amount will the family need for their living expenses after three years?

Answer 1

Answer:

$44,994.56

Explanation:

Provided that

Spending amount for living expenses by a family = $40,000

Percentage increase is 4%

Number of years = 3

So, the family living expenses after three years equal to

= Spending amount for living expenses by a family × (1 + rate)^number of years

= $40,000 × (1 + 0.04)^3

= $40,000 × 1.124864

= $44,994.56