Question

Calculating the Effect of Inflation.Bill and Sally Kaplan have an annual spending plan that amounts to $39,500. If inflation is 3 percent a year for the next three years, what amount will the Kaplans need for their living expenses three years from now?Solution: $39,500 ¿1.093 (FV$1, 3%, 3 years) = $43,173.50LO: 3-3Topic: Future valueLOD: IntermediateBloom tag: Apply

Answer 1

Answer:

$39,348

Explanation:

The amount that Bill and Sally Kaplan need represents the future value of $36,000

The inflation rate of 3 % if the interest rate

$36,000 will be the present value  PV

The period is three years

The Future Value: FV = PV x(1+r)n

=FV = $36,000 x (1+3/100)3

=$36,000 x (1+0.03)3

=$36,000 x 1.093

=$39,348