Answer:
A cart of groceries that costed US$ 160 in 2005, costs US$ 197.49 in 2010 at an average rate of 4.3% of inflation.
Explanation:
1. Let's review the data given to us for solving the question:
Cost of cart of groceries in 2005 = US$ 160
Period of inflation analysis = 5 years
Inflation average rate = 4.3 % compounded annually
2. Let's find the future value of the cost of a cart of groceries in 2010, using the following formula:
FV = PV * (1 + i) ⁿ
PV = Cost of cart of groceries in 2005 = US$ 160
number of periods (n) = 5 (Period of inflation analysis = 5 years)
Inflation average rate (i) = 4.3% = 0.043
Replacing with the real values, we have:
FV = 160 * (1 + 0.043) ⁵
FV = 160 * (1.043) ⁵
FV = 160 * 1.234302311
FV = 197.49 (Rounding to two decimal places)