Question

In 2007, Joelle spent $5,000 on her health care. If this amount increased by 6 percent per year, what would be the amount Joelle spent in 2017 for the same health care? Hint: Use Exhibit 1-A. (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.)

Answer 1

Answer: $8954.24

Step-by-step explanation:

Given the following :

Amount spent by Joelle on Healthcare in 2007 = $5000

Healthcare cost increases by 6% yearly ;

Amount spent on Healthcare in 2017 =?

Number of years between 2007 - 2017 = 10 years

6% yearly increase for 10 years :

The future value (FV) factor = (1 + r) ^n

Where r = rate = 0.06 ; n = period = 10 years

FV factor = (1 + 0.06)^10

FV factor = 1.79084

Therefore, Amount in 2017 equals ;

Amount in 2007 × FV factor

$5000 × 1.79084

= $8954.24