bellambernal2003
Answered

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If the present value of an item is P
and we experience an inflation rate
of r for t years, what will the future
value of the item be?
P = $100
r = 4%
t = 15

Sagot :

inflation means, the same item costs more however is the same item, so if a tomato in January 1st costs $1 and by December 31st it costs $2, the price went up by twice, however is same tomato, it didn't become twice as large, anyhow, inflation eats away value and thus is a Decay case.

[tex]\qquad \textit{Amount for Exponential Decay} \\\\ A=P(1 - r)^t\qquad \begin{cases} A=\textit{current amount}\\ P=\textit{initial amount}\dotfill &100\\ r=rate\to 4\%\to \frac{4}{100}\dotfill &0.04\\ t=\textit{elapsed time}\dotfill &15\\ \end{cases} \\\\\\ A=100(1 - 0.04)^{15}\implies A=100(0.96)^{15}\implies A\approx 54.21[/tex]

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