Question

Goods costing $22.87 at the beginning of the year 1955 cost $184.74 at the beginning of...

Goods costing $22.87 at the beginning of the year 1955 cost $184.74 at the beginning of the year 1991. Find the average annual inflation rate over this time period. Express your answer the nearest thousandth of a percent.

Math   Statistics-And-Probability   
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Answer #1

Answer:

Cost in 1991 = $184.74
Cost in 1955 = $22.87
Rate (r) = ??
Time (n) = 36 years

Cost in 1991 = Cost in 1955 * (1 + r)^ n
$184.74 = $22.87 * (1 + r) ^ 36
$184.74 /$22.87 = (1 + r) ^ 36
8.077831 = (1 + r) ^ 36
8.077831 ^ (1 / 36) = (1 + r)
1.05974 = 1 + r
r = 0.05974
or r = 5.974%

Annual inflation rate is 5.974%

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