How do I find the cumulative inflation in this problem?
$begingroup$
I'm stuck at trying to understand the answer to this problem related with inflation. Can someone enlighten me with the proper interpretation of it?.
$text{The problem is as follows:}$
$text{In a certain country located in Asia, the inflation in September was 10% and the inflation}$
$text{in October is 5%. What is the accumulated inflation during these two months?}$
Common sense (I believe) would dictate to sum both like this:
$textrm{Accumulated inflation}=textrm{Inflation in Septemeber}+textrm{Inflation in October}$
Therefore,
$textrm{Accumulated inflation}=10%+5%=15% $
However by checking the answers from my book tells me I'm wrong since the correct answer is $15.5%$ and not $15%$. Which part is not correct in my interpretation?.
arithmetic finance
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
$endgroup$
add a comment |
$begingroup$
I'm stuck at trying to understand the answer to this problem related with inflation. Can someone enlighten me with the proper interpretation of it?.
$text{The problem is as follows:}$
$text{In a certain country located in Asia, the inflation in September was 10% and the inflation}$
$text{in October is 5%. What is the accumulated inflation during these two months?}$
Common sense (I believe) would dictate to sum both like this:
$textrm{Accumulated inflation}=textrm{Inflation in Septemeber}+textrm{Inflation in October}$
Therefore,
$textrm{Accumulated inflation}=10%+5%=15% $
However by checking the answers from my book tells me I'm wrong since the correct answer is $15.5%$ and not $15%$. Which part is not correct in my interpretation?.
arithmetic finance
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
$endgroup$
add a comment |
$begingroup$
I'm stuck at trying to understand the answer to this problem related with inflation. Can someone enlighten me with the proper interpretation of it?.
$text{The problem is as follows:}$
$text{In a certain country located in Asia, the inflation in September was 10% and the inflation}$
$text{in October is 5%. What is the accumulated inflation during these two months?}$
Common sense (I believe) would dictate to sum both like this:
$textrm{Accumulated inflation}=textrm{Inflation in Septemeber}+textrm{Inflation in October}$
Therefore,
$textrm{Accumulated inflation}=10%+5%=15% $
However by checking the answers from my book tells me I'm wrong since the correct answer is $15.5%$ and not $15%$. Which part is not correct in my interpretation?.
arithmetic finance
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
$endgroup$
I'm stuck at trying to understand the answer to this problem related with inflation. Can someone enlighten me with the proper interpretation of it?.
$text{The problem is as follows:}$
$text{In a certain country located in Asia, the inflation in September was 10% and the inflation}$
$text{in October is 5%. What is the accumulated inflation during these two months?}$
Common sense (I believe) would dictate to sum both like this:
$textrm{Accumulated inflation}=textrm{Inflation in Septemeber}+textrm{Inflation in October}$
Therefore,
$textrm{Accumulated inflation}=10%+5%=15% $
However by checking the answers from my book tells me I'm wrong since the correct answer is $15.5%$ and not $15%$. Which part is not correct in my interpretation?.
arithmetic finance
arithmetic finance
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
asked Oct 27 '17 at 18:50
Chris Steinbeck BellChris Steinbeck Bell
810315
810315
add a comment |
add a comment |
2 Answers
2
active
oldest
votes
$begingroup$
Assume you are interested in an item that costs
1) 100 USD at the beginning of September.
At the end of September the same item is sold for
2) 110 USD , I.e 10% inflation.
At the end of October this item is sold for
110 + (5/100)110 USD = 110(1.05)USD=
(105 +10.5) USD = 115.5 USD, I.e 5% inflation in October.
"Combined " inflation:
Total price increase; 115.5 -100 USD =15.5 USD.
Original price: 100 USD
Total price increase in % for the combined period?
Can you do it?
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
$endgroup$
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
add a comment |
$begingroup$
If I have goods worth $1,000D$ at the beginning of September, they are worth $1,100D$ at the end of September, and October inflation applies to this figure, so that at the end of October, they are worth $1,155D$.
The calculation is $(1+0.1)times (1+0.05)=1.155=1+0.155$
So if the cost of goods at the beginning of September is $C$ and the inflation rate for September is $i_S %$, then the cost of those same goods at the end of September is $$C+frac {i_S}{100}C=left(1+frac {i_S}{100}right)C$$
Now the cost of goods at the beginning of October is $left(1+frac {i_S}{100}right)C$ and if inflation duding October is $i_O%$ the same logic applies and the price at the end of October is $$left(1+frac {i_O}{100}right)left(1+frac {i_S}{100}right)C$$
and this is $$left(1+frac {i_S+i_O}{100}+frac {i_Scdot i_O}{10000}right)C$$
The second term here involves adding the interest rates, which is what you would do if you were applying simple interest (inflation). But here we have compound interest (inflation). The price at the end of September is higher than the price at the beginning of the month, and the inflation in October applies not just to the price at the beginning of September, but also to the increase due to September inflation. So there is an adjustment to be made.
Think what happens if prices double in September and then double again in October, if you want a simple example.
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
$endgroup$
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
add a comment |
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2 Answers
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active
oldest
votes
2 Answers
2
active
oldest
votes
active
oldest
votes
active
oldest
votes
$begingroup$
Assume you are interested in an item that costs
1) 100 USD at the beginning of September.
At the end of September the same item is sold for
2) 110 USD , I.e 10% inflation.
At the end of October this item is sold for
110 + (5/100)110 USD = 110(1.05)USD=
(105 +10.5) USD = 115.5 USD, I.e 5% inflation in October.
"Combined " inflation:
Total price increase; 115.5 -100 USD =15.5 USD.
Original price: 100 USD
Total price increase in % for the combined period?
Can you do it?
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
$endgroup$
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
add a comment |
$begingroup$
Assume you are interested in an item that costs
1) 100 USD at the beginning of September.
At the end of September the same item is sold for
2) 110 USD , I.e 10% inflation.
At the end of October this item is sold for
110 + (5/100)110 USD = 110(1.05)USD=
(105 +10.5) USD = 115.5 USD, I.e 5% inflation in October.
"Combined " inflation:
Total price increase; 115.5 -100 USD =15.5 USD.
Original price: 100 USD
Total price increase in % for the combined period?
Can you do it?
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
$endgroup$
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
add a comment |
$begingroup$
Assume you are interested in an item that costs
1) 100 USD at the beginning of September.
At the end of September the same item is sold for
2) 110 USD , I.e 10% inflation.
At the end of October this item is sold for
110 + (5/100)110 USD = 110(1.05)USD=
(105 +10.5) USD = 115.5 USD, I.e 5% inflation in October.
"Combined " inflation:
Total price increase; 115.5 -100 USD =15.5 USD.
Original price: 100 USD
Total price increase in % for the combined period?
Can you do it?
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
$endgroup$
Assume you are interested in an item that costs
1) 100 USD at the beginning of September.
At the end of September the same item is sold for
2) 110 USD , I.e 10% inflation.
At the end of October this item is sold for
110 + (5/100)110 USD = 110(1.05)USD=
(105 +10.5) USD = 115.5 USD, I.e 5% inflation in October.
"Combined " inflation:
Total price increase; 115.5 -100 USD =15.5 USD.
Original price: 100 USD
Total price increase in % for the combined period?
Can you do it?
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
edited Oct 28 '17 at 6:54
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
answered Oct 27 '17 at 20:55
Peter SzilasPeter Szilas
11.4k2822
11.4k2822
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
add a comment |
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
I'm wondering if assuming a 100 USD price is that really necessary. I mean it could had been a price of let's say $P$, because in the end this is factorized and cancelled in the denominator and multiplied by $100$ isn't it?. By following your steps the percentage is directly calculated as follows $%Inflation=frac{15.5}{100}x100=15.5%$ Is this reasoning correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 11:57
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
$begingroup$
Chris. Not necessary !!!! Just sometimes one feels more at ease with "numbers" than with percentages. The advantage here is, as you noted, to convert back to a percentage is almost obvious. your calculation is fine. This way the amount in US corresponds to the same number in%. Helps?
$endgroup$
– Peter Szilas
Oct 30 '17 at 14:35
add a comment |
$begingroup$
If I have goods worth $1,000D$ at the beginning of September, they are worth $1,100D$ at the end of September, and October inflation applies to this figure, so that at the end of October, they are worth $1,155D$.
The calculation is $(1+0.1)times (1+0.05)=1.155=1+0.155$
So if the cost of goods at the beginning of September is $C$ and the inflation rate for September is $i_S %$, then the cost of those same goods at the end of September is $$C+frac {i_S}{100}C=left(1+frac {i_S}{100}right)C$$
Now the cost of goods at the beginning of October is $left(1+frac {i_S}{100}right)C$ and if inflation duding October is $i_O%$ the same logic applies and the price at the end of October is $$left(1+frac {i_O}{100}right)left(1+frac {i_S}{100}right)C$$
and this is $$left(1+frac {i_S+i_O}{100}+frac {i_Scdot i_O}{10000}right)C$$
The second term here involves adding the interest rates, which is what you would do if you were applying simple interest (inflation). But here we have compound interest (inflation). The price at the end of September is higher than the price at the beginning of the month, and the inflation in October applies not just to the price at the beginning of September, but also to the increase due to September inflation. So there is an adjustment to be made.
Think what happens if prices double in September and then double again in October, if you want a simple example.
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
$endgroup$
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
add a comment |
$begingroup$
If I have goods worth $1,000D$ at the beginning of September, they are worth $1,100D$ at the end of September, and October inflation applies to this figure, so that at the end of October, they are worth $1,155D$.
The calculation is $(1+0.1)times (1+0.05)=1.155=1+0.155$
So if the cost of goods at the beginning of September is $C$ and the inflation rate for September is $i_S %$, then the cost of those same goods at the end of September is $$C+frac {i_S}{100}C=left(1+frac {i_S}{100}right)C$$
Now the cost of goods at the beginning of October is $left(1+frac {i_S}{100}right)C$ and if inflation duding October is $i_O%$ the same logic applies and the price at the end of October is $$left(1+frac {i_O}{100}right)left(1+frac {i_S}{100}right)C$$
and this is $$left(1+frac {i_S+i_O}{100}+frac {i_Scdot i_O}{10000}right)C$$
The second term here involves adding the interest rates, which is what you would do if you were applying simple interest (inflation). But here we have compound interest (inflation). The price at the end of September is higher than the price at the beginning of the month, and the inflation in October applies not just to the price at the beginning of September, but also to the increase due to September inflation. So there is an adjustment to be made.
Think what happens if prices double in September and then double again in October, if you want a simple example.
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
$endgroup$
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
add a comment |
$begingroup$
If I have goods worth $1,000D$ at the beginning of September, they are worth $1,100D$ at the end of September, and October inflation applies to this figure, so that at the end of October, they are worth $1,155D$.
The calculation is $(1+0.1)times (1+0.05)=1.155=1+0.155$
So if the cost of goods at the beginning of September is $C$ and the inflation rate for September is $i_S %$, then the cost of those same goods at the end of September is $$C+frac {i_S}{100}C=left(1+frac {i_S}{100}right)C$$
Now the cost of goods at the beginning of October is $left(1+frac {i_S}{100}right)C$ and if inflation duding October is $i_O%$ the same logic applies and the price at the end of October is $$left(1+frac {i_O}{100}right)left(1+frac {i_S}{100}right)C$$
and this is $$left(1+frac {i_S+i_O}{100}+frac {i_Scdot i_O}{10000}right)C$$
The second term here involves adding the interest rates, which is what you would do if you were applying simple interest (inflation). But here we have compound interest (inflation). The price at the end of September is higher than the price at the beginning of the month, and the inflation in October applies not just to the price at the beginning of September, but also to the increase due to September inflation. So there is an adjustment to be made.
Think what happens if prices double in September and then double again in October, if you want a simple example.
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
$endgroup$
If I have goods worth $1,000D$ at the beginning of September, they are worth $1,100D$ at the end of September, and October inflation applies to this figure, so that at the end of October, they are worth $1,155D$.
The calculation is $(1+0.1)times (1+0.05)=1.155=1+0.155$
So if the cost of goods at the beginning of September is $C$ and the inflation rate for September is $i_S %$, then the cost of those same goods at the end of September is $$C+frac {i_S}{100}C=left(1+frac {i_S}{100}right)C$$
Now the cost of goods at the beginning of October is $left(1+frac {i_S}{100}right)C$ and if inflation duding October is $i_O%$ the same logic applies and the price at the end of October is $$left(1+frac {i_O}{100}right)left(1+frac {i_S}{100}right)C$$
and this is $$left(1+frac {i_S+i_O}{100}+frac {i_Scdot i_O}{10000}right)C$$
The second term here involves adding the interest rates, which is what you would do if you were applying simple interest (inflation). But here we have compound interest (inflation). The price at the end of September is higher than the price at the beginning of the month, and the inflation in October applies not just to the price at the beginning of September, but also to the increase due to September inflation. So there is an adjustment to be made.
Think what happens if prices double in September and then double again in October, if you want a simple example.
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
edited Oct 29 '17 at 12:19
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
answered Oct 27 '17 at 18:54
Mark BennetMark Bennet
81.4k983180
81.4k983180
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
add a comment |
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
The answer is $15.5%$ not $1.155$. However I get the idea that the accumulated percentage in terms of decimals is $0.155$ (Is this reasoning correct?). Why the accumulation is a product and not a sum?. I assume that inflation is growing in size therefore you are adding to the supposed total $0.1$ for the first month and $0.05$ in the second month. Is this part correct?.
$endgroup$
– Chris Steinbeck Bell
Oct 27 '17 at 19:04
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
@ChrisSteinbeckBell Note that $1.155=100$ % $ + 15.5$ %. It takes a bit of getting used to making the translation. You get a product for the reason I tried to explain in the first para - the inflation in month $2$ applies to the price at the end of month $1$, which includes the inflation in month $1$.
$endgroup$
– Mark Bennet
Oct 27 '17 at 19:30
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
I figured out the idea of where the 15.5% came from as noted in the first comment, but Why it is a product of both and not a sum is not yet clear to me. Can you translate the things you just said in terms of an equation or adding a step in your equation from above?. Because all the numbers "look the same" it is not easy to get the picture.
$endgroup$
– Chris Steinbeck Bell
Oct 29 '17 at 12:02
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
$begingroup$
@ChrisSteinbeckBell I've added a formula and some more explanation. Hope it helps.
$endgroup$
– Mark Bennet
Oct 29 '17 at 12:20
add a comment |
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