00:01
So for this question, we are looking at the rate of inflation for the price of a car.
00:08
So the rate of inflation is going up 2 .5 % per year.
00:13
And the current price of the car is 21 ,000.
00:15
So we are just trying to look at the average prices that increases over the next five years, given that rate of inflation.
00:22
So the equation given is p of n equals $21 ,000, multiplied by $1 ,000.
00:39
1 .025 raise to the n.
00:42
So what we know with this equation is that 1 .025 is just the amount is increasing because the 2 .5 % is that 025 at the end there.
00:51
And then it's raised to the n because that's the number of years after the 21 ,000.
00:57
So we just have to look at this equation for the next five years.
01:00
So let's start with a year later.
01:04
The equation is going to be 21 ,000.
01:10
So i'd be 1 .025, raise to the 1.
01:16
That's just going to end up being 21 ,000 times 1 .025.
01:20
And your answer is going to be 21 ,525.
01:29
So that is the price after one year due to inflation.
01:34
So now we are going to do it after two years.
01:40
Exact same thing.
01:42
Just plugging in two for our ends.
01:45
So we're going to have 1 .05 raise to the second.
01:52
And the answer to that one comes up to $22 ,063 and then 0 .125.
02:01
And we're actually going to round that to the two nearest decimal points.
02:05
So 0 .125 would just round up to 0 .13...