# APPRECIATION AND INFLATION WORD PROBLEMS

When the value of an item such as a house or investment increases, we say it appreciates in value. You may have noticed that the prices of everyday goods and services also increase over time due to inflation.

Problem 1 :

The inflation rate over the next three years is predicted to be 2% then 3% then 3.5%. What will be the cost in three years time of an item which currently costs \$140 if the cost rises in line with inflation?

Solution:

Cost in 3 years = \$152.23

Problem 2 :

What would you expect a bicycle costing \$500 today to cost in four years time, if the inflation rate is predicted to be 3%, 3.5%, 4% and then 5% over the four years?

Solution:

Cost in 4 years = \$582

Problem 3 :

If the rate of inflation is expected to remain constant at 4% per year for the next 5 years, what would you expect a \$20000 car to cost in 5 years time?

Solution:

Cost in 5 years = \$24333

Problem 4 :

An investment of \$18250 is left to accumulate interest over a 4 year period. During the first year the interest paid was 9.2%, and in successive years the rates paid were 8.6%, 7.5% and 5.6%. Find the value of the investment after 4 years.

Solution:

Given, P = \$18250, T = 4 years

r = 9.2% for first year and

r = 8.6% for second years and

r = 7.5% for third years and

r = 5.6% for fourth years.

Problem 5 :

An amount of money is invested at 8% for the first year, 11% for the second year and 7% for the third year. What is the percentage increase in the value of the investment over this period?

Solution:

= 28.3 % increase

Problem 6 :

A politician's wage increases by 3%, 8%, 5% and then 10% over a four year period. What is the percentage increase in the wage over this period of time?

Solution:

= 28.5 % increase

Problem 7 :

A share fund reported a 9% increase in value for year 1, a 13% decrease in value for year 2 and a 4% increase in value for year 3. What was the overall percentage increase or decrease of the share fund over the 3 years?

Solution:

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