Inflation has been running 1% per year. A car now costs $30,000. How much would
ID: 3148504 • Letter: I
Question
Inflation has been running 1% per year. A car now costs $30,000. How much would it have cost 3 years ago? HINT [See Example 3.] (Round your answer to the nearest cent.)Inflation has been running 1% per year. A car now costs $30,000. How much would it have cost 3 years ago? HINT [See Example 3.] (Round your answer to the nearest cent.)
Inflation has been running 1% per year. A car now costs $30,000. How much would it have cost 3 years ago? HINT [See Example 3.] (Round your answer to the nearest cent.)
Explanation / Answer
Solution:
If car cost $ C 3 years ago
rate r = Inflation is 1% per year
time = t = 3 year
the car cost now =$ C(1+r/100)^t
= $ C(1+1/100)^3
= C (1.01)^3
so solve
C(1.01)^3=30,000
C = 30000 / (1.01)^3
C = $ 29117.70
and
it would have cost 3 years ago = $ 29117.70