Question

assume the rate of inflation is 7% per year for the next 2 years. what will be the cost of goods 2 years from now adjusted for inflation if the goods cost $330.00 today? round to the nearest cent

Answer 1

To find the cost of the goods after two years we are going to use the formula:

`A=P(1+(r)/(n))^(nt)`

where P is the cost now, r is the inglation rate in decimal form, n is the number of times the interest is taken per year and t is the time.

In this case we have P=$300.00, r=0.07, n=1 (once per year) and t=2 (two years). Plugging this values we have:

`A=330(1+(0.07)/(1))^(1\cdot2)=377.82`

Therefore after two years the cost will be $377.82