Post by: xoxogossipgirl on November 02, 2010, 02:15:56 pm
figure out the $ increase over the 8 years ($1.75), divide it by the original amount ($0.90) and times that by 100. then to get the annual inflation rate, you had to divide that amount (194.44%) by 8, which was 24.31%
however i tried to apply the same principal to the attached SA q (MAV 2008)
and got 5.04% - which was incorrect, and it was actually 3.89%. in their solutions they just used the normal compound interest formula
i might be missing something really obvious, but i just don't see the difference in these 2 questions that mean using a complete different method.
i know there must be something obvious i'm not seeing,
so if anyone could point it out to me that'd be amazing
thank you :)
Post by: plato on November 02, 2010, 06:28:00 pm
The simplest way is to use the TVM Solver with PMT = -0.9 and FV = +2.65
Check:
Using the same method in the second question gives me 3.8886%
Check:
Post by: xoxogossipgirl on November 02, 2010, 06:45:59 pm
It was in my cheatbook coz I know that when I did it first (probably using compound interest formula) I got 14.45%
Safer to assume the compound interest way and assume it's a bloody company exam mistake?
I might go ask my teacher before the exam tomorrow =/