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Year 1 PV = 10,000 × 1.05 × 0.877 = $9,209
Year 2 PV = 20,000 × 1.05^2 × 0.769 = $16,957
Year 3 PV = 25,000 × 1.05^3 × 0.675 = $19,535
why do we ^2 ,^3 the inflation rate?, why isnt it just increase of 105% every year? why are we doing 105%*105%?what does specific annual inflation mean ?
thanks
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