Question

Find the cost of each item in 5 years, assuming an inflation rate of 8% (compounded continuously). (Round your answers to the nearest cent.)

(e) HDTV set, $1,900
$  

(f) small car, $17,000
$  

(g) car, $28,000
$  

(h) tuition, $27,000
$

Answer 1

EAR =[ e^(Annual percentage rate) -1]*100

Effective Annual Rate=(e^(8/100)-1)*100

Effective Annual Rate% = 8.33

e

Future value = present value*(1+ rate)^time

Future value = 1900*(1+0.0833)^5

Future value = 2834.64

f

Future value = present value*(1+ rate)^time

Future value = 17000*(1+0.0833)^5

Future value = 25362.53

g

Future value = present value*(1+ rate)^time

Future value = 28000*(1+0.0833)^5

Future value = 41773.58

h

Future value = present value*(1+ rate)^time

Future value = 27000*(1+0.0833)^5

Future value = 40281.67