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March 29, 2017

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if the price of milk has quadrupled (that is, grown four times) over the past 25 years, what has been the annual rate of inflation in milk price over that time period?

  • Finance - ,

    (1+i)^25 = 4
    take the 25th root of both sides
    1+i = 4^(1/25)
    1+i = 1.0570188
    i = .057 or 5.7%

    check: suppose milk cost $0.50 25 years ago
    now it would cost
    .5(1.0570188)^25
    = 2.0
    which is four times what it was 25 years ago

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