College Algebra (10th Edition)

Published by Pearson
ISBN 10: 0321979478
ISBN 13: 978-0-32197-947-6

Chapter 6 - Section 6.7 - Financial Models - 6.7 Assess Your Understanding - Page 476: 59

Answer

$ r\approx 2.532\%$

Work Step by Step

Inflation: The amount A that ${{\$}} P$ can purchase after n years, with annual inflation rate r (decimal) is $A=P\cdot(1-r)^{n}$ --- Given $A=950, n=2,P=1000$ find $r$ $A=P\cdot(1-r)^{n} \qquad.../\div P$ $\displaystyle \frac{A}{P}=(1-r)^{n}\qquad.../(...)^{1/n}$ $(\displaystyle \frac{A}{P})^{1/n}=1-r$ $r=1-(\displaystyle \frac{A}{P})^{1/n}=1-(\frac{950}{1000})^{1/2}\approx 0.02532$ $ r\approx 2.532\%$
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