SOLUTION: Assuming continuous compounding, what will it cost to buy a $35 item in 2 years at the following inflation rates? A. 3% B. 4% C. 5%

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Question 1066813: Assuming continuous compounding, what will it cost to buy a $35 item in 2 years at the following inflation rates?
A. 3%
B. 4%
C. 5%
Found 2 solutions by stanbon, Alan3354:
Answer by stanbon(75887) About Me  (Show Source):
You can put this solution on YOUR website!
Assuming continuous compounding, what will it cost to buy a $35 item in 2 years at the following inflation rates?
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Value at time "t" equation::
A(t) = P*e^(rt)
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A. 3%
A(2) = 35*e^(0.03*2)
A(2) = 37.16
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B. 4%
A(2) = 35*e^(0.04*2)
A(2) = $37.92
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I'll leave the last to you.
Cheers,
Stan H.
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C. 5%

Answer by Alan3354(69443) About Me  (Show Source):
You can put this solution on YOUR website!
Assuming continuous compounding, what will it cost to buy a $35 item in 2 years at the following inflation rates?
A. 3%
B. 4%
C. 5%
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Cost+=+35%2Ae%5E%28r%2At%29
t = 2
r = 0.03, 0.04, 0.05