Three years ago the bus fare from lae to madang was k60. Now it is k80.
Calculate the average annual rate of inflation for the cost of fares from lae to madang over 3 years
To calculate the average annual rate of inflation for the bus fare from Lae to Madang over 3 years, we will use the formula for the compound annual growth rate (CAGR).
The CAGR formula is:
CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) - 1
Given:
Beginning Value (3 years ago) = K60
Ending Value (now) = K80
Number of Years = 3
CAGR = (K80 / K60) ^ (1 / 3) - 1
CAGR = (1.3333)^(1/3) - 1
CAGR = 1.116 - 1
CAGR = 0.116
Therefore, the average annual rate of inflation for the cost of fares from Lae to Madang over 3 years is approximately 11.6%.