In January of 1997,the U.S.Consumer Price Index (CPI)stood at 159.1.By January of 2011,the level had risen to 220.2.What was the average annual rate of inflation over this time period as measured by the CPI?
A)2.35%
B)3.31%
C)2.97%
D)2.60%

Question

Quizplus · Accepted Answer

The average annual rate of inflation can be calculated using the formula for compound annual growth rate (CAGR): [(Ending Value/Beginning Value)^(1/Number of Years)] - 1. Here, [(220.2/159.1)^(1/14)] - 1 = 0.0235 or 2.35%.