Question

During a certain year of the nominal interest rate was 8% the real interest rate was 3% and the CPI was 176.7 at the beginning of the year the cpi at the end of the year was

Answer 1

Real interest rate = Nominal interest rate- Inflation Rate

Inflation Rate = Nominal Interest Rate- Real interest rate

Inflation Rate = 8 - 3 = 5%

$\large Inflation rate = \frac{CPI_{End-Year}-CPI_{Previous-year}}{CPI_{previous-year}}*100$

$\large 5 = \frac{CPI_{End-Year}-176.7}{176.7}*100$

0.05*176.7 = CPI end of year - 176.7

CPI at the end of year = 8.835 + 176.7

CPI at the end of year = 185.535

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