Question

If prices increase at a monthly rate of 0.5%, by what percentage do they increase in a year?

What is the formula to solve?

Answer 1

it will increase by 60% and multiply 0.5 by 12 = 60

Answer 2

We have been given that prices increase at a monthly rate of 0.5%.

Number of months in a year = 12

Let us suppose the item cost $1, then the percentage is given by

`P=P_0(1+r)^n\\ \\ P=1(1+0.005)^(12)\\ \\ P=1.062`\\

Therefore, increase in a year is

`1.062-1\\ =0.062`

Therefore, the required percentage in a year is 6.2%