If a national budget is increased by 10% each year, what will be the budget afte

₹0.0

Question: If a national budget is increased by 10% each year, what will be the budget after 3 years if the current budget is $500 million?

Options:

Correct Answer: $665.5 million

Solution:

Budget after 3 years = 500 * (1 + 0.10)^3 = 500 * 1.331 = $665.5 million.

If a national budget is increased by 10% each year, what will be the budget after 3 years if the current budget is $500 million?

If a national budget is increased by 10% each year, what will be the budget after 3 years if the current budget is $500 million?

Step 1: Identify the current budget, which is $500 million.
Step 2: Determine the percentage increase, which is 10%. Convert this percentage to a decimal by dividing by 100. So, 10% becomes 0.10.
Step 3: Calculate the growth factor for one year. This is done by adding 1 to the decimal increase: 1 + 0.10 = 1.10.
Step 4: Since the budget increases by 10% each year, we need to find the growth factor for 3 years. This is done by raising the growth factor to the power of 3: (1.10)^3.
Step 5: Calculate (1.10)^3. This equals approximately 1.331.
Step 6: Multiply the current budget by the growth factor for 3 years: $500 million * 1.331.
Step 7: Calculate the final amount: $500 million * 1.331 = $665.5 million.

Compound Interest – The question tests the understanding of compound growth, where an initial amount increases by a fixed percentage over multiple periods.
Exponential Growth – It assesses the ability to apply the formula for exponential growth, which is crucial in financial calculations.