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    Geometric Mean Rate of Increase

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    A recent article suggested that if you earn $25,000 a year today and the inflation rate continues at 3 percent per year, you'll need to make $33,598 in 10 years to have the same buying power. You would need to make $44,771 if the inflation rate jumped to 6 percent.

    Confirm that these statements are accurate by finding the geometric mean rate of increase.

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    Solution Preview

    Geometric mean is calculated by this formula:

    Here you have X = 3% for all years 1 to 10
    So you geometric mean =
    So the geometric mean ...

    Solution Summary

    Geometric mean rate of increase is investigated.