SOLUTION: Given the inflation model C(t)=C0(1+r)t and given that a can of soup that currently sells for $1.18 sold for $0.90 3 years ago, what has the average annual rate of inflation been f

Algebra ->  Exponential-and-logarithmic-functions -> SOLUTION: Given the inflation model C(t)=C0(1+r)t and given that a can of soup that currently sells for $1.18 sold for $0.90 3 years ago, what has the average annual rate of inflation been f      Log On


   

Question 1198085: Given the inflation model C(t)=C0(1+r)t and given that a can of soup that currently sells for $1.18 sold for $0.90 3 years ago, what has the average annual rate of inflation been for the past 3 years? Round to two decimal places.
Answer by ikleyn(52784) About Me  (Show Source):
You can put this solution on YOUR website!
.
Given the inflation model C(t)=C0(1+r)t and given that a can of soup that currently sells
for $1.18 sold for $0.90 3 years ago, what has the average annual rate of inflation been
for the past 3 years? Round to two decimal places.
~~~~~~~~~~~~~~~~ 

From the problem,

    1.18 = 0.9%2A%281%2Br%29%5E3,    (1)


and they want you find the rate "r".  From (1)

    1.18%2F0.9 = %281%2Br%29%5E3

    1.31111111 = %281%2Br%29%5E3

    1 + r = root%283%2C1.31111111%29 = 1.094493448.


Hence,  r = 1.094493448 - 1 = 0.094493448...


Round as you need . . .

Solved.