Food prices have been rising at a rate of 4% per year for several years. If the annual cost of food for a typical family of four is $10,500 today, what would it have been 15 years ago?
Do I use the A=P(A+rt) formula? It doesn't seem like the compound interest formula because then it would say compounded daily/monthly/etc. I don't think it is I=Prt either because then it would say the amount of interest.
This has the same effect as "a compound interest rate, compounded annually". Unless stated otherwise, the interest rate is understood be be compounded annually, that is, once a year.
So you would have:
P(1.04)^15 = 10500 , where P is the original amount
P = 10500 / (1.04)^15 or 10500(1.04)^-15
= 10500(.5552645..) = $5830.28