The average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000.(a) Calculate the average monthly inflation rate (fm) for this model.(b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model?(c) Estimate what these will sell for 10 years from now, expressed in today’s dollars. Please show all steps and formulas, don't use excel. The answer should be (a) 0.3877%, (b) 4.753%, (c) $55,682
The average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000.(a) Calculate the average monthly inflation rate (fm) for this model.(b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model?(c) Estimate what these will sell for 10 years from now, expressed in today’s dollars. Please show all steps and formulas, don't use excel. The answer should be (a) 0.3877%, (b) 4.753%, (c) $55,682
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000.
(a) Calculate the average monthly inflation rate (fm) for this model.
(b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model?
(c) Estimate what these will sell for 10 years from now, expressed in today’s dollars.
Please show all steps and formulas, don't use excel. The answer should be (a) 0.3877%, (b) 4.753%, (c) $55,682
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