Determine the actual value of the $10,000 investment for the building owner in Example 3.1 if the economy experiences an annual inflation rate of 4 percent.

Example 3.1

A building owner has $10,000 available and has the option to invest this money in either (i) a bank that has an annual interest rate of 7 percent or (ii) buying a new boiler for the building. If he decides to invest all the money in the bank, how much will the building owner have after ten years? Compare this amount if simple interest had been paid.