Question

Bill and Sally Kaplan have an annual spending plan that amounts to $36,000. If inflation is 3 percent a year for the next three years, what amount will the Kaplans need for their living expenses three years from now?

Answer 1

Answer:

$39,338.17

Explanation:

The computation of the future value of their living expenses is presented below:

As we know that

Future value = Present value × (1 + inflation rate)^number of years

where,

Present value = $36,000

Inflation Rate = 3%

Number of years = 3 years

So, the future value

= $36,000 × (1 + 0.03)^3

= $36,000 × 1.092727

= $39,338.17