Answer :
Final answer:
The equation is an exponential decay model, used to calculate the depreciating purchasing power over time. After ten years, the purchasing power of $20000 is expected to decrease to about $12231.76, reflecting a 5% annual decrease in purchasing power.
Explanation:
The equation y=20000(0.95)^x is an exponential decay model where 'y' is the purchasing power of $20000 after 'x' years. We can calculate the expected purchasing power after ten years by substituting x=10 in the equation.
So, y = 20000(0.95)¹⁰. Calculating this gives us approximately $12231.76. Therefore, the purchasing power of $20000 is projected to decrease to about $12231.76 in ten years, given a 5% annual decrease in purchasing power.
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