Class_Nov12_2013_Lec22_ISE460(1)(1)

Step 1 find the actual inated price at the end of year

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Unformatted text preview: 216.68 (January) Selected Price Indexes (Index for Base Year = 100, Calendar Month = April) Average Infla%on Rate (f ) Fact:  Base Price = $100 (year 0)  Infla%on rate (year 1) = 4%  Infla%on rate (year 2) = 8% Find: Average infla%on rate over 2 years?   Step 1: Find the actual inflated price at the end of year 2. $100 ( 1 + 0.04) ( 1 + 0.08) = $112.32   Step 2: Find the average infla%on rate by solving the following equivalence equa%on. $100 ( 1+ f)2 = $112.32 f = 5.98% 0 $112.32 1 2 $100 Example 11.1 Average Infla%on Rate Sample Calcula%on for Average Infla%on rate for Gasoline: Given: P = 127.3, F = 175.3, N = 2009 ­2000 = 9. Find: f   Average Infla%on Rate General Infla%on Rate (f) Formula: _ CPIn = CPI0 (1 + f )n , 1/ n Ⱥ CPI Ⱥ f = Ⱥ n Ⱥ − 1 Ⱥ CPI0 Ⱥ _ _ where f = The genreal inflation rate, CPIn = The consumer price index at the end period n, CPI0 = The consumer price index for the base period. Calcula%on:   Given:   CPI for 2009 = 213.2,   CPI for 2000 = 172.2   Find...
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