CA Foundation P3 · Chapter 18 · Question 6 of 9
The link relatives of prices for three successive years (each on the previous year as 100) are 110, 105 and 120. Taking the year before the first as base (= 100), the chain index for the third year is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 138.6
Explanation
Chain index = product of link relatives / 100² = (110 x 105 x 120)/10,000 = 1.10 x 1.05 x 1.20 x 100 = 138.6. Adding the percentage rises (10 + 5 + 20 = 35) gives 135, and the simple average of the relatives gives 111.67.
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