A family spends $45,000 on living expenses. If inflation averages 3% over the next 5 years, how...

A family spends $45,000 on living expenses. If inflation averages 3% over the next 5 years, how much would the family need to spend after 5 years to maintain their standard of living?

Expert Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=45000*(1.03)^5

=45000*1.15927407

=$52167.33(Approx)

jeff jeffy answered 2 years ago

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