Question

Between 2005 and 2008​, the average rate of inflation was about 4.6​% per year. If a cart of groceries cost ​$110 in​ 2005, what did it cost in 2008?

Answer 1

The answer is 492.52016

Answer 2

We can use the compound (interest) formula: A = P x (1 + r/100)^n

Where A is our final cost, P is our original price in 2005 = $110, r is our inflation rate = 4.6, and n is our number of years from 2005 to 2008 = 3.

Apply this to the formula: A = 110 x (1 + 4.6/100)^3 = $125.8889 = $126.

The cart of groceries cost a total of $126 in 2008.