Answer to Question #132001 in Financial Math for Tk

Question

After 5 years the tractor needs to be replaced. During this this inflation remains at 7 % constant. Determine the cost of a new tractor after 5 years

Answer 1

Use the compound interest formula A=P(1+i)ⁿ

The variables are

P= x

i=0.07

n=5

Substitute the values

A=x(1+0.07)⁵

A=1.4x

In five year's time, the cost of the tractor will be 1.4x with x being the current cost of the tractor