Pretend the US inflation rate had been 4.7% per year and the Argentinian inflation rate had been 30% per month.
(a) What is the yearly equivalent of Argentina's 30% monthly inflation rate?
(b) What is the monthly equivalent of the US 4.7% yearly inflation rate?
(a) [(1 + .30)^12] - 1
(b) [(1 + .047)^(1 /12)] - 1
To calculate the yearly equivalent of Argentina's 30% monthly inflation rate, we need to convert the monthly rate into a yearly rate. Similarly, to find the monthly equivalent of the US 4.7% yearly inflation rate, we will convert the yearly rate into a monthly rate.
(a) To find the yearly equivalent of Argentina's 30% monthly inflation rate:
Step 1: Convert the monthly rate into an annual rate by multiplying it by 12 (since there are 12 months in a year).
Yearly rate = Monthly rate * 12
Yearly rate = 30% * 12 = 360%
Therefore, the yearly equivalent of Argentina's 30% monthly inflation rate is 360%.
(b) To find the monthly equivalent of the US 4.7% yearly inflation rate:
Step 1: Divide the yearly rate by 12 to convert it into a monthly rate.
Monthly rate = Yearly rate / 12
Monthly rate = 4.7% / 12 = 0.3917%
Therefore, the monthly equivalent of the US 4.7% yearly inflation rate is approximately 0.3917%.