AACE International AACE Certification CCP Question # 40 Topic 5 Discussion

To calculate the total percentage increase in steel prices over three years, we compound the inflation rates for each year:

Year 1: 2.5%

Year 2: 2.5%

Year 3: 3.0%

The formula to calculate the total percentage increase is:

Total Increase=(1+Rate Year 1)×(1+Rate Year 2)×(1+Rate Year 3)−1\text{Total Increase} = (1 + \text{Rate Year 1}) \times (1 + \text{Rate Year 2}) \times (1 + \text{Rate Year 3}) - 1Total Increase=(1+Rate Year 1)×(1+Rate Year 2)×(1+Rate Year 3)−1 Total Increase=(1+0.025)×(1+0.025)×(1+0.03)−1\text{Total Increase} = (1 + 0.025) \times (1 + 0.025) \times (1 + 0.03) - 1Total Increase=(1+0.025)×(1+0.025)×(1+0.03)−1 \text{Total Increase} = 1.025 \times 1.025 \times 1.03 - 1 \approx 1.082 - 1 = 0.082 \text{ or 8.2%}

So, the correct answer isB. 8.2%.