Today, your dream car costs $62,200. You feel that the price of the car will increase at an annual rate 2.2 percent. If you plan to wait 6 years to buy the car, how much will it cost at that time?

The dream car will cost $70,875 in 6 years time

Explanation:

Here, we are interested in calculating the amount a car will cost if we know the annual appreciation rate of the cost and we decide to wait for some years to purchase the car in question.

To calculate the cost at that time, let’s we shall be using a modification of the compound interest formula.

The cost at that time will be;

C = I(1 + r)^t

Where C is the cost after six years which is unknown

I is the present cost which is $62,200

r is the appreciation percentage = 2.2% = 2.2/100 = 0.022

t is the time which is 6 years

Substituting these values in the modified equation, we have;

C = 62,200(1 + 0.022)^6

C = 62,200(1.022)^6

C = $70,875.44

To the nearest whole amount, it should be $70,875