Price Rising

Question

In a country where inflation is a concern, prices have risen by 21 % over a 3-year period.

 

By what percent B do the prices rise each year?
Find the first time t it takes for prices to rise by 4 %.
Show results to two decimal places.

 

Use a continuous growth rate to model inflation by a function of the form Upper P equals Upper P 0 e Superscript k t.
Show k to four decimal places.

Answer 1

1.21 = e^3r

ln1.21 = 3r

r = ln1.21/3 = 0.0635 = 6.35%

1.04 = e^0.0635t

ln1.04 = 0.0635t

t = ln1.04/0.0635 = 0.6181 years to reach 4%