The CPI-U for Americans 62 years of age and older (some of your professors and some of your authors are interested in this!) present the following annual inflation rates in percent:

YearRate %20011.620022.420031.920043.320053.4

a.Assuming the index value in year 2000 was 100.0, determine the index for each year from 2001 to 2005 to one place after the decimal.

b.Since inflation, like interest, is compounded from period to period (e.g., year to year), estimate the overall annual inflation rate per year from 2002 to 2006. Suggestion! Do not simply average the rates given above

Answer key

10: 100.0, 101.6, 104.0, 106.0, 109.5, 113.2 and 2.517%