If the inflation rate is 3% per year, what will be the value of $100 after one y

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Question: If the inflation rate is 3% per year, what will be the value of $100 after one year?

Options:

Correct Answer: $103

Solution:

Value after one year = $100 * (1 + 0.03) = $100 * 1.03 = $103

If the inflation rate is 3% per year, what will be the value of $100 after one year?

If the inflation rate is 3% per year, what will be the value of $100 after one year?

Step 1: Understand that the inflation rate is 3% per year. This means that prices will increase by 3% over one year.
Step 2: Start with the initial amount of money, which is $100.
Step 3: Convert the percentage into a decimal. 3% as a decimal is 0.03.
Step 4: Add 1 to the decimal. This gives you 1 + 0.03 = 1.03.
Step 5: Multiply the initial amount ($100) by the result from Step 4 (1.03). So, $100 * 1.03 = $103.
Step 6: The final value after one year, considering the inflation, is $103.

Inflation Calculation – Understanding how inflation affects the value of money over time.