The federal-level Pell Grant program provides financial aid to needy college students. The grant increases annually to account for inflation. The maximum total Pell Grant award increased from $5550 to $5,730 from 2013 to 2015. (a) What was the average inflation rate per year in this prior 2?year period? (b) Beginning in 2018, grants will no longer increase with inflation. What will be the maximum award starting in 2018 and thereafter, assuming the inflation rate in 2016 and 2017 is 2.5% per year?
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The federal-level Pell Grant program provides financial aid to needy college students. The grant increases annually to account for inflation. The maximum total Pell Grant award increased from $5550 to $5,730 from 2013 to 2015. (a) What was the average inflation rate per year in this prior 2?year period? (b) Beginning in 2018, grants will no longer increase with inflation. What will be the maximum award starting in 2018 and thereafter, assuming the inflation rate in 2016 and 2017 is 2.5% per year? (a) 5550(1 +f)² = 5730
1 + f = (1.03243^)0.5
f = 0.0161 (1.61% per year)
(b) Award in 2018 = 5730(1 + 0.025)² = $6020.08
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