Inspection equipment costs $2,000 now. The general price inflation rates for the
ID: 1245713 • Letter: I
Question
Inspection equipment costs $2,000 now. The general price inflation rates for the past five years have been 2%, 3%, 4%, 3%, and 4%. What is the real $ cost of the item now?
A) $2,341
B)$2,219
C) $1,709
D) $1,893
Can someone please show me how to compute the correct answer. I use a financial calculator, so please explain how to enter it into the calculator if you can. I need to know how to compute this problem and similar problems with inflation rates, need to know how to compute the correct answer for college finals!
Explanation / Answer
C.) The cost is $2000, but the question is asking the real cost, which is the cost before the inflation of the past 5 years. So the answer will be $2000/1.02/1.03/1.04/1.03/1.04=$1709