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Sagot :
The formula that models inflation is
[tex]S=C(1+r)^t[/tex]C= value today
r= annual inflation rate → usually this value is given as a percentage, but when you input the value in the formula, you have to express it as a decimal value.
S= the inflated value given a determined period of time (t).
a.
r=6%=6/100=0.06/year
C=$465000
t=10 years
[tex]\begin{gathered} S=465000(1+0.06)^{10} \\ S=832744.1789 \end{gathered}[/tex]The price of the house in 10 years at an inflation rate of 6% will be S=$832744.18
b.
r=3%=3/100=0.03/year
C=$510000
t=5years
[tex]\begin{gathered} S=510000(1+0.03)^5 \\ S=437954.3531 \end{gathered}[/tex]The price of the house in 5 years at an inflation rate of 3% will be S=$437954.35
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