CIMA BA1 · Chapter 10 · Question 9 of 10
A chain-based price index shows prices rising by 8% in Year 2, rising by 6% in Year 3 and falling by 4% in Year 4. If Year 1 = 100, what is the fixed-base index for Year 4 (to one decimal place)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 109.9
Explanation
The chain links must be multiplied, not added: 100 x 1.08 x 1.06 x 0.96 = 109.9. Adding the percentage changes (8 + 6 - 4 = 10) incorrectly gives 110.0.
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