Answer:
In 2015 it will cost $408
Explanation:
Giving the following information:
The rate of inflation in the year 2014 was 2% per year.
What would be the cost in 2015 of an item that costs $400 in 2014?
We need to use the following formula:
Final Value= Present Value*(1+i)^n
i= inflation rate
FV= 400*1.02= $408
Answer:
Inflation refers to the time in the economy when the prices of goods and services increase due to fluctuations in the demand and supply in various perspectives.
Explanation:
Giving the following information:
The rate of inflation in the year 2014 was 2% per year.
We need to calculate, the cost of an item in 2015 that costs $400 in 2014.
[tex]\begin{aligned}\text{Future Value}&=\text{Present Value}\times(1+\text{i})^{\text{n}}\\&=400\times(1+0.02)^{1}\\&=\$408 \end{aligned}[/tex]
Where i= rate of interest
n= number of years.
Therefore the final answer is, the cost of an item in 2014 will be $408.
And to the nearest cent, the final answer is $410.
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