Suppose That Inflation Is 3% Per Year

question 53

Multiple Choice

Suppose that inflation is 3% per year. This means the cost of an item increases by 3% each year. Suppose a jacket cost $150 in 2011. Find a formula that gives the cost of the jacket C in dollars after t years.

• A)C = $150 + 1.03^t
• B)C = $150 × 1.03^t
• C)C = $150 × 1.3^t
• D)C = $150 + 1.3^t

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Definitions:

Donated Land

Land that has been given to an organization as a gift, usually recognized at its fair market value on the date of donation.

Deferred Compensation

A portion of an employee's compensation that is set aside to be paid out at a later date, often used as a retirement benefit.

Treasury Stock

Shares of a company’s own stock that it has reacquired from shareholders but not retired, listed as a contra equity account on the balance sheet.

Common Stock Optionwarrants

Equity derivatives that give the holder the right to purchase common stock at a specified price within a certain time period.