Jack has tracked the annual inflation rate (shown below) for a top-rated sportsman-level fishing outfit that he has always hoped to own. It cost $1000 ten years ago, but he could not afford it over the intervening years. (a) Estimate the cost now, which is the end of year 10. (b) Is the cost estimate the same using an average inflation rate of 5% per year over the 10-year period? Why or why not?
(a) Cost; year 10 = 1000(1.10)? (1.0)?
= $1610.51
(b) Cost; year 10, 5% per year = 1000(1 + 0.05)¹? = $1628.89
The cost is not the same because there are different inflation rates on different costs in each year over the 10 years
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