Question

the local power company plans to raise rates to cover the increased cost of producing power. they determine the costs will increase by 4.2% per year for the next 10 years. if you paid a total of $1031.60 for power last year, what would you expect to pay for power over the next 10 years?

Answer 1

To calculate the expected cost of power over the next 10 years with a 4.2% annual increase, you would use the formula for compound interest. The future cost for the 10th year is found by multiplying the current cost ($1031.60) by (1 + 0.042) raised to the power of 10. The total cost over the 10 years would be the sum of the costs for each year calculated with this formula.

Step-by-step explanation:

The question involves calculating the expected cost of power for the next 10 years with an annual increase of 4.2%. This is a problem that can be solved using the formula for compound interest:

Future Value = Present Value x (1 + Rate)Number of Periods

Given that the current cost is $1031.60 and the increase is 4.2% per year for 10 years, the formula becomes:

Future Value = $1031.60 x (1 + 0.042)10

Calculating the above will give you the expected cost for the 10th year. To find the total cost over the 10 years, you would add the cost for each year, which can be found by adjusting the number of periods in the formula above for each year from 1 to 10 and summing them. However, it's worth noting that this question may be misstating the problem, as it's more common to ask for the cost in the 10th year rather than the cumulative cost over all 10 years, which would require a different calculation.