Answered: Solve this for r: r-fl. 02-1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a1. You learn on the business channel that inflation was about 0.8% last month. Assume this rate is maintained each month for a year. What will the annualized rate be? EXAMPLE: A rate of 0.1% per month represents (1 + 0.001)^12 -1 = 0.0121 or 1.21% annually.

a2. Your sales grew 4% last year. EXAMPLE: A 2% growth rate for the year would require 1.02 = (1 + r)^12. Solve this for r: See image ; r = .00165 or .165% per month on average. What average monthly growth rate is needed to give the 4% growth?

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