The Consumer Price Index is increasing at a rate of 6% per year. By what factor will prices increase in 5 years? Use the approximate doubling time formula (rule of 70).
Round to two decimal places.
According to the Rule of 70, we can approximate the doubling time by dividing 70 by the annual growth rate.
In this case, the annual growth rate is 6%, so the doubling time is approximately 70/6 = 11.67 years.
Since we are interested in the factor by which prices will increase in 5 years, we need to find how many doubling times pass in 5 years.
5 years / 11.67 years per doubling = 0.428 doubling times
Now, we can find the factor by which prices will increase by using the formula for doubling time:
Factor = 2^0.428 = 1.32
Therefore, prices will increase by a factor of 1.32 in 5 years.