Given the inflation model Ct C1 rt and given that a can of

Given the inflation model C(t) = C(1 + r^t and given that a can of soup that currently sells for $1.31 sold for $0.60 6 years ago, what has the average annual rate of inflation been for the past 6 years. Round to two decimal places.

Solution

Dear Student Thank you for using Chegg !! Given C(t) = C(1 + r)^t C(6) = 1.31 $ C = 0.6 $ t = 6 years => 1.31 = 0.6*(1+r)^6 2.183333 = (1+r)^6 1.13899 = 1+r r = 0.13899 r% = 13.89903