A first class postage stamp now costs $0.46. If we assume an annual rate of inflation of 2.06%, in what year would you expect a stamp to cost $0.60?

1 Answer
Nov 20, 2016

Answer:

In #14# th year the stamp is expected to cost more than #$0.6#.

Explanation:

Here present value, #p= $0.46#. Future value #f=$0.6#. Rate of inflation #r=2.06% = 2.06/100=0.0206#. Time, #t=?#

Formula: #f= p(1+r)^t or (1+r)^t = f/p#Logging both sides we get #t*log(1+r) = (logf-logp) or t=(logf-logp)/log(1+r)=(log 0.6-log0.46)/log(1+0.0206)= (log 0.6-log0.46)/log1.0206=13.03(2dp)#years [Ans]