Question

Inflation iterating the function c(x = 1.05x gives the future cost of an item at a constant 5% inflation rate. find the cost of a $2000 ring in five years at 5% inflation.

Answer 1

The cost of a $2000 ring after five years at 5% inflation can be obtained using the formula for the cost of an item. However, in addition, the 1.05 needs to be raised to the number of years elapsed which is equal to 5. Thus, the equation becomes cost = 2000(1.05)^5. The final answer is that after five years, the cost of the ring is $2552.56 at 5% inflation.