Calculate the Average Annualized Inflation Rate for a Given Time Period

E

The calculation is as follows: (36/10)^(1/20)-1=0.0661

To calculate the average annualized inflation rate during the given period, we need to use the formula for compound annual growth rate (CAGR).

CAGR = (Ending Value / Beginning Value)^(1 / Number of Periods) - 1

In this case, the beginning value is the cost of the basket of goods in year 0, which is $10, and the ending value is the cost in year 20, which is $36. The number of periods is 20 years.

CAGR = ($36 / $10)^(1 / 20) - 1

Let's calculate this using a calculator or a spreadsheet:

CAGR = (3.6)^(0.05) - 1 CAGR = 1.046464 - 1 CAGR = 0.046464

Now, convert the CAGR to a percentage by multiplying by 100:

CAGR = 0.046464 * 100 CAGR = 4.6464%

Therefore, the average annualized inflation rate during this period is approximately 4.65%.

Among the provided answer choices, the closest option is A. 4.51%.