Question

The strategic plan of a solar energy company that manufactures high-efficiency solar cells includes an expansion of its physical plant in 4 years. The manager in charge of planning estimates the expenditure required to be $1.17 million in 4 years. The company plans to sets aside $1 million now into an account that earns interest equal to the rate of inflation. What will the inflation rate have to be in order for the company to have exactly the right amount of money for the expansion?

a) 4%
b) 2%
c) Unknown
d) 6%

Answer 1

The answer is "Option a".

Step-by-step explanation:

Given:

FV=1.17

PV=1

n=4

We are aware of a future value formula that is:

`FV = PV* (1 + i)^n`

Put the value into the above formula:

`\to 1.17 = 1* (1 + i)^(4)\\\\\to 1.04 = (1 + i)\\\\\to 1.04 -1 = i\\\\\to i=0.04\\\\`

Calculating the percentage of i= 4%

Therefore The rate of interest is equivalent to the inflation rate, which is projected predicted, according to global meta and experts, The Us will reach 5.70 percent even by conclusion of the this year. In the future, we anticipate that the inflation rate in the US is 3.20 in twelve months.