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In my book there is a question involving 4 Years sales figures and it asks to calculate the adjsuted sales figure taking into account 2% pa market growth. I thought I would need to do (450/102)*100 then (480/102)*100 (540/102)*100 etc to get the adjusted figures. I don’t understand why between year 2 and 3 you do (540/104)*100?
Yr 1 Yr 2 Yr 3 Yr 4
450 480 540 620Figs adjusted for 2% pa market growth
450 471 519 584Also, the second part of the question gives the below RPI figures and goes on to say the rate of inflation for the period is 1.4% – how have they calculated this? Many Thanks
100 102 105 109
For year 1 it is 450
To restate year 2, it is 480/1.02 = 471
To restate year 3, you need to divide by 1.02 twice (for 2 years)
So 540/(1.02^2) = 519
To restate year 4 you need to divide by 1.02 three times (for 3 years)
So 620/(1.02^3) = 584With regard to the second part, I have no idea how they calculated 1.4%.
To get the average inflation rate per year (which I assume is what they were asking for) they should have taken the third root of 109/100 and then subtracted 1. This gives 0.029, or 2.9% per year. (Third root, because there are three years inflation between the first and the fourth year.)
(The average rate is clearly above 1.4%, because each individual year it is about 1.4% 🙂 )Were these questions from a F5 book? Its not very likely in F5 – it is more F9.
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