Question

Suppose that inflation causes the value of a dollar to decrease at a rate of​ 4.5% per year. To use a general exponential model to find the value of the dollar at some future time compared to its present​ value, what would you set r equal​ to?
Select the correct answer below.

A.
-4.5

B.
4.5

C.
-0.045

D.
0.045

Answer 1

Answer:

Option C. -0.045

Step-by-step explanation:

we know that

The general exponential model to find the value of the dollar at some future time compared to its present​ value is equal to

$F=P(1+r)^{t}$  

where  

F is the value of the dollar at some future time  

P is the present value  

r is the rate of increasing or decreasing in decimal  (remember that the equation is general)

t  is Number of Time Periods  

In this problem

The rate is decreasing

so

r=-4.5%=-4.5/100=-0.045