Get expert advice and insights on any topic with IDNLearn.com. Discover reliable and timely information on any topic from our network of knowledgeable professionals.

If the present value of an item is P
and we experience an inflation rate
of r for t years, what will the future
value of the item be?
P = $100
r = 4%
t = 15


Sagot :

inflation means, the same item costs more however is the same item, so if a tomato in January 1st costs $1 and by December 31st it costs $2, the price went up by twice, however is same tomato, it didn't become twice as large, anyhow, inflation eats away value and thus is a Decay case.

[tex]\qquad \textit{Amount for Exponential Decay} \\\\ A=P(1 - r)^t\qquad \begin{cases} A=\textit{current amount}\\ P=\textit{initial amount}\dotfill &100\\ r=rate\to 4\%\to \frac{4}{100}\dotfill &0.04\\ t=\textit{elapsed time}\dotfill &15\\ \end{cases} \\\\\\ A=100(1 - 0.04)^{15}\implies A=100(0.96)^{15}\implies A\approx 54.21[/tex]