Suppose You Know the Value of the Consumer Price Index $$\text { CPI in year } 2 = \frac { 100 \times \text { CPI in year } 1 } { \text { Inflation rate in year } 1 \times 100 }$$

question 265

Multiple Choice

Suppose you know the value of the consumer price index (CPI) in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?

• A)
• \[\text { CPI in year } 2 = \frac { 100 \times \text { CPI in year } 1 } { \text { Inflation rate in year } 1 \times 100 }\]
• B)
• \[\text { CPI in year } 2 = \frac { \text { CPI in year } 2 \div 100 } { \text { Inflation rate in year } 2 + 100 }\]
• C)
• \[\text { CPI in year } 2 = \frac { ( \text { Inflation rate in year } 2 \div \text { CPI in year } 1 ) + \text { CPI in year } 1 } { 100 }\]
• D)
• \[\text { CPI in year } 2 = \frac { ( \text { CPI in year } 1 \times \text { Inflation rate in year } 2 ) + ( 100 \times \text { CPI in year } 1 ) } { 100 }\]

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Definitions:

Invested

Capital that has been put into a project, company, or various assets to earn profits or achieve other financial goals.

Mutual Fund

An investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.

Deposit

A sum of money placed into an account or given to a party as security for the fulfillment of a contract.

Return

The gain or loss on an investment over a specific period, typically expressed as a percentage of the investment's initial cost.