a) S∗=(((((((S∗i)−P)∗i−P)∗i−P)∗i−P)∗i−P)∗i−P)∗i−P
S∗=S∗i7−P∗i−1i7−1
P=(S∗i7−S∗)∗i7−1i−1
P-annual payments
S-the care price
S^*-the market value after 7-years
i=1+0.04=1.04
P=12,000∗1.047−5,000)∗1.047−11.04−1=1,366.27
D=SP∗100%
D-Depreciation rate
D=12,0001,366.27∗100%=11.39%
b) 1,366.27∗7=9563.89
c) The inflation rate is 4%
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