SOLUTION: Ten years ago, an item cost $2,500. The rate of inflation for the first 4 years was 4%, during the next 3 years 6% and for the last 3 years 9%. Assuming that the increase in price

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Question 1172776: Ten years ago, an item cost $2,500. The rate of inflation for the first 4 years was 4%, during the next 3 years 6% and for the last 3 years 9%. Assuming that the increase in price were due to the inflation alone, what is the average inflation rate during 10 years?

Answer by ikleyn(52786) About Me  (Show Source):
You can put this solution on YOUR website!
.

The average multiplicative inflation factor during 10 years under given condition is


    root%2810%2C+%281%2B0.04%29%5E4%2A%281%2B0.06%29%5E3%2A%281%2B0.09%29%5E3%29%29 = 1.060799.


It means that the nominal inflation rate is  1.060799 - 1 = 0.060799,  or  6% (rounded).    ANSWER

Solved.

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Notice that to answer the question,  the initial/original price of the item  DOES  NOT  matter.

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On inflation,  see numerous solved problems in the lesson
    - Inflation and Salary problems
in this site.