The monthly average cable TV bill in 2017 is $. If cable costs are climbing at an annual rate of % per year, how much will the typical cable subscriber pay in ? Assume annual compounding.

Full question:

The monthly average cable TV bill in 2017 is $80.58. If cable costs are climbing at an annual rate of 6% per year, how much will the typical cable subscriber pay in 2021? Assume annual compounding.

Answer and Explanation:

The present value of the TV bill is the money worth of the future TV bill today. Present value calculation shows that the value today is more than the value in the future(time value of money)

We calculate cost of the cable subscription in the future using future value as follows :

Since there is annual compounding

Future value formula= PV(1+r)^n

Given :

Present value PV= $80.58

r=6%

n=2021-2017=4 years

Substitute in formula FV = PV(1+r)^n

Future value=$80.58(1+0.06)^4

=$80.58(1+0.06)^4

=$80.58*1.2624

=$101.73

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this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.