The Price Index in the First Year Is 150;in the Second

question 38

Multiple Choice

The price index in the first year is 150;in the second year it is 160;and in the third year it is 175.The inflation rate is about

• A)1.07 percent between the first and second years, and 1.09 percent between the second and third years.
• B)5.4 percent between the first and second years, and 9.4 percent between the second and third years.
• C)6.7 percent between the first and second years, and 9.4 percent between the second and third years.
• D)10 percent between the first and second years, and 1.09 percent between the second and third years.

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Definitions:

Amortized

A process of paying off debt in regular installments over a period of time, where each payment is partially principal and partially interest.

Compounded Semi-annually

Refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods twice a year.

Amortization Schedule

A table detailing each periodic payment on an amortizing loan (typically a mortgage), as well as how much of each payment is interest versus principal and the balance remaining after each payment.

Compounded Semi-annually

Interest calculation method where interest is added to the principal sum of a loan or deposit twice a year, resulting in interest earning interest.