If the inflation rate was 3 percent in one year, a product that cost $500 at the beginning of the year would cost approximately _____ at the beginning of the next year.

Question

a. $515
b. $560
c. $503
d. $510

Answer 1

To calculate the cost of the product at the beginning of the next year with an inflation rate of 3%, you can use the following formula:

\[ \text{New Cost} = \text{Old Cost} \times (1 + \text{Inflation Rate}) \]

In this case:

• Old Cost = $500
• Inflation Rate = 3% = 0.03

Now, plug in the values:

\[ \text{New Cost} = 500 \times (1 + 0.03) = 500 \times 1.03 = 515 \]

So, the product that cost $500 at the beginning of the year would cost approximately $515 at the beginning of the next year.

The answer is: a. $515.