The cost of constructing a roundabout in a lowtraffic residential neighborhood five years ago was $625,000. A civil engineer designing another one that is almost exactly the same estimates the cost today will be $740,000. (a) If the cost had increased only by the inflation rate over the fiveyears, what was the actual inflation rate per year? (b) What is the interest rate involved in this computation?
The cost of constructing a roundabout in a lowtraffic residential neighborhood five years ago was $625,000. A civil engineer designing another one that is almost exactly the same estimates the cost today will be $740,000. (a) If the cost had increased only by the inflation rate over the fiveyears, what was the actual inflation rate per year? (b) What is the interest rate involved in this computation?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The cost of constructing a roundabout in a lowtraffic residential neighborhood five years ago was $625,000. A civil engineer designing another one that is almost exactly the same estimates the cost today will be $740,000. (a) If the cost had increased only by the inflation rate over the five
years, what was the actual inflation rate per year? (b) What is the interest rate involved in this computation?
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