Question

Here is the monthly average prices of oil in Eastern Township in 2018 Price ($ per litre) 119.2 119.5 121.2 130.2 135.2 136.2 Price (S per litre) 134.0 132.8 132.7 131.6 121.3 112.9 Month Month Januar Februan March April Jul August September October November December June This table shows that the price of oil increased during the first half of 2018, and decreased during the second half 2018

a)Overall the price of oil passed from 119.2 $/litre in January to 112.9 $/litre in December. What has been the average monthly variation? Give your answer in percentage, and round it to two decimals.

b)Assuming that this overall variation will continue for the beginning of 2019, give an estimation of the average price of oil inApril2019.Round your answer to one decimal.

c)Find the mean and the mean absolute deviation (MAD) of the monthly oil prices. Round your answers to one decimal.

Answer 1

Answer: a. To answer this question, we would be calculating the CAGR of oil prices from January to December. The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods.

It's calculated as (Final Value-Initial Value)/(Initial Value*Number of time periods)*100.

In this case, the number of time periods would be calculated in terms of months. The number of time periods would be 11.

Initial Value=119.2

Final Value=112.9

CAGR = (112.9-119.2)/(119.2*11)*100 = -0.48%. The CAGR is negative which shows that the average monthly variation has been negative and that the oil prices have decreased on an average, which is a good indicator for the inflation.

b. To calculate the future value of the average oil price in April'2019, we use the same formula as used above. We just use the CAGR = -0.38%. Here, the initial value will be 112.9, which was the value of oil price in Dec'2018. The number of time periods is 4.

-0.38 = (Final Value - 112.9)/(112.9*4)*100

Solving this equation for final value, we get the answer as 111.2.

c.

Oil Price Value	Deviations from the previous month	Absolute Deviation
119.2	0.3	0.3
119.5	1.7	1.7
121.2	9	9
130.2	5	5
135.2	1	1
136.2	-2.2	2.2
134	-1.2	1.2
132.8	-0.1	0.1
132.7	-1.1	1.1
131.6	-10.3	10.3
121.3	-8.4	8.4
112.9

Mean Oil Price Value = 127.2

Mean Absolute Deviation = 3.7