Question

The cost of a newsletter subscription is $20 per year. The cost is expected to increase 10% each year. Which expression can be used to find the cost n years from now? What will the expected cost be at the end of 3 years?

Answer 1

$20*(1+10%)^n

$26.62

Explanation:

The expression to use in dete $20*(1+10%)^nrmine the cost of the subscription in n years is given below:

=$20*(1+10%)^n

The expected cost at end of 3 years is computed below:

fv=pv*(1+r)^n

fv is the future cost of the subscription

pv is the current cost of $20

r is the expected percentage increase in cost

n is the number of years

the formula remains

where n is the number of years 3

10% is the same as 0.1

expected cost=$20*(1+0.1)^3

=$20*(1.1)^3

=$20*1.331 =$26.62