If the inflation rate is 3% per year, how much will a $100 item cost after one y

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Question: If the inflation rate is 3% per year, how much will a $100 item cost after one year?

Options:

Correct Answer: $103

Solution:

Cost after one year = Original cost * (1 + Inflation rate) = 100 * (1 + 0.03) = $103

If the inflation rate is 3% per year, how much will a $100 item cost after one year?

If the inflation rate is 3% per year, how much will a $100 item cost after one year?

Step 1: Identify the original cost of the item, which is $100.
Step 2: Identify the inflation rate, which is 3%. Convert this percentage to a decimal by dividing by 100. So, 3% becomes 0.03.
Step 3: Calculate the total cost after one year by using the formula: Cost after one year = Original cost * (1 + Inflation rate).
Step 4: Substitute the values into the formula: Cost after one year = 100 * (1 + 0.03).
Step 5: Simplify the equation inside the parentheses: 1 + 0.03 = 1.03.
Step 6: Multiply the original cost by the result from Step 5: 100 * 1.03 = 103.
Step 7: The final cost of the item after one year is $103.

Inflation Calculation – Understanding how to apply the inflation rate to determine the future cost of an item.