Question

The rate of inflation is 3%. The cost of an item in future years can be found by iterating the function c(x)=1.03x. Find the cost of a $1500 refrigerator in three years if the rate of inflation remains constant.

Select one:
a. $1645.00
b. $1545.00
c. $1639.09
d. $1539.99

Answer 1

year 1

cost = 1.03 (1500) = 1545

put 1545 in for x in year 2

year 2

1.03 * 1545 = 1591.35

put in 1591.35 in for x in year 3

year 3

1.03 *1591.35=1639.0905

round to the nearest cent

cost in three years: $1639.09

Choice C