At an inflation rate of 9 percent,the purchasing power of $1 would be cut in half in 8.04 years.How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4%?
A) 12 years
B) 15 years
C) 18 years
D) 20 years
E) 23 years

Question

Quizplus · Accepted Answer

We can use the formula for the time it takes for purchasing power to be cut in half:

t = ln(2) / ln(1+r)

where r is the inflation rate as a decimal.

Plugging in r = 0.09, we get:

t = ln(2) / ln(1+0.09) = 8.04 years

Now we can solve for t with r = 0.04:

t = ln(2) / ln(1+0.04) ≈ 17.32, which rounds to 18 years.

Therefore, the best choice is C.

At an Inflation Rate of 9 Percent,the Purchasing Power of $1