If inflation has been running at 4.55% per year and a new car costs $22800 today, what would it have cost 3 years ago?
We can use the formula:
New cost = Original cost x (1 + inflation rate)^number of years
Let's first calculate what the inflation factor is for 3 years of 4.55% inflation per year:
Inflation factor = (1 + 0.0455)^3 = 1.1468
This means that prices have increased by 14.68% over the 3-year period.
Now we can use the formula to find the original cost:
Original cost = New cost / inflation factor
Original cost = $22800 / 1.1468
Original cost ≈ $19863.29
Therefore, the new car would have cost approximately $19863.29 3 years ago, taking into account the inflation rate of 4.55% per year.