As part of your financial planning, you wish to purchase a new car

7

years from today. The car you wish to purchase costs

$10,000

today, and your research indicates that its price will increase by

2%

to

4%

per year over the next

7

years.

a.Estimate the price of the car at the end of 7 years if inflation is (1) 2% per year and (2) 4% per year. b.How much more expensive will the car be if the rate of inflation is 4% rather than 2%? c.Estimate the price of the car if inflation is 2% for the next 3 years and 4% for 4 years after that.