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29 December, 19:39

Assume the average vehicle selling price in the United States last year was $35,996. The average price 4 years earlier was $29,208. What was the annual increase in the selling price over this time period?

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Answers (2)
  1. 29 December, 19:45
    0
    5.36 percent

    Explanation:

    A=P (1+r/100) ^n

    where

    A=future value

    P=present value

    r=rate of interest

    n=time period.

    Hence

    35996=29208 (1+r/100) ^4

    (35996/29208) ^ (1/4) = (1+r/100)

    (1+r/100) = 1.0536 (Approx)

    Hence r = (1.0536-1) * 100=5.36%
  2. 29 December, 19:56
    0
    Answer: 5.36%

    Explanation:

    The problem above could be solved by applying the formula which relates Present value, future value, rate and time of an annuity.

    From the question;

    Last Year Average selling price = Future Value (FV) = $35,996

    Price 4 years earlier = Present Value (PV) at the time = $29,208

    Period (t) = 4 years

    Rate (r) = r

    FV = PV * (1 + r) ^4

    35996 = 29208 * (1 + r/100) ^4

    $29208 * (1+r/100) ^4 = $35996

    (1+r) ^4 = $35996/$29208

    (1+r) ^4 = 1.23240208

    (1 + r) = (1.23240208) ^0.25

    1 + r = 1.053629946

    r = 1.053629946 - 1

    r = 0.053629946

    r = 0.0536

    r = 5.36%
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