Question

18 Oll prices have increased a great deal in the last decade. The following table shows the average oil price for each year since 1949. Many companies use oil products as a resource in their own business operations (like airline firms and manufacturers of plastic products). Managers of these firms will keep a close watch on how rising oil prices will impact their costs. The interest rate in the PV/FV equations can also be interpreted as a growth rate in sales, costs, profits, and so on. eBook Point References Average Oil Prices Per Year Barrel Year Barrel Year 1949 $2.54 1971 $ 3.39 1993 1950 $2.51 1972 S 3.39 1994 1951 $2.53 1973 $ 3.89 1995 1952 $2.53 1974 $ 6.87 1996 1953 $2.68 1975 7.67 1997 1954 $2.78 1976 S 8.19 1998 1955 52.77 1977 $ 8.85 1999 1956 $2.79 1978 $ 9.00 2000 1957 $3.09 1979 $12.64 2001 1958 $3.01 1980 $21.59 2002 1959 $2.90 1981 $31.77 2003 1960 $2.88 1982 $28.52 2004 1961 52.89 1983 $26.19 2005 1962 $2.90 1984 $25.88 2006 1963 $2.89 1985 $24.09 2007 1964 2.88 1986 $12.51 2008 1955 $2.86 1987 $15.40 2009 1956 $2.88 1988 $12.58 2010 1967 52.92 1989 15.86 2011 1968 $2.94 1 990 $20.03 2012 1969 $3.09 1991 $16.54 2013 1970 $3.18 1992 $15.99 2014 2015 Per Barrel $14.25 $13.16 $14.62 $18.46 $17.23 $10.87 $15.56 $26.72 $21.84 $22.51 $27.54 $38.93 $ 46.47 $58.30 $64.67 $91.48 $53.48 $71.21 87.04 $93.02 $97.91 $93.26 $48.79 Using the 1949 oil price and the 1963 oil price, compute the annual growth rate in oil prices during those 14 years. (Round your answer to 2 decimal places.)

Find the Annual growth rate

Answer 1

Given Oil Price at 1949 Oil Price at 1963 Period 2.54 $ 2.89 $ 14 Years Solution Annual Growth rate = Price at 1963 Price at 1949 1.1378 1.0093 0.93% Period 0.0714 1 -1 Hence, Annual growth rate for the period is 0.93%