Answer
$2.53\%.$
Work Step by Step
Use the given formula
$A=P(1-r)^n$,
where $P$ is the principal, the amount now, $r$ is the annual inflation rate, $n$ is the number of years, $A$ is the amount $P$ will be worth back after $n$ years
Here
$A=\$950$
$P=\$1000$
$n=2$years
Hence $\$950=\$1000(1-r)^2$, thus $(1-r)^2=\frac{950\$}{1000\$}=0.95$.
Solve the above equation to obtain: $\sqrt{(1-r)^2}=\sqrt{0.95}\\1-r=\sqrt {0.95}\\r=1-\sqrt{0.95}\\r=1.02532-1\\r=02532\\r\approx2.53\%.$
