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yaroslaw [1]
2 years ago
11

If the $10.61 cost in 1972 is equal to $68.69 in 2013, then what rate of inflation, i%=?, was used to determine the 2013 costs?

Express your answer as a %.
Business
1 answer:
Paraphin [41]2 years ago
4 0

Answer:

inflation rate = 4.66%

Explanation:

we can determine the inflation rate using the future value formula:

future value = present value x (1 + i)ⁿ

  • future value = $68.69
  • present value = $10.61
  • n = 41 years
  • i = inflation rate ?

$68.69 = $10.61 x (1 + i)⁴¹

(1 + i)⁴¹ = $68.69 / $10.61 = 6.474081056

⁴¹√(1 + i)⁴¹ =  ⁴¹√6.474081056

1 + i = 1.0466

i = 1.0466 - 1 = 0.0466 = 4.66%

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