Question

Exercise 03.21 Check My Work (1 remaining) eBook {Exercise 3.21) If an asset dedines in value from $5000 to $3500 over nine years, what is the mean annual growth rate in the asset's value over these nine years? Round your answer to four decimal places.

Answer 1

Let us assume the interest rate = i%

$\large 5000(1+i)^9 = 3500$

$\large \implies (1+i)^9 = \frac{3500}{5000}$

$\large \implies 1+i = 0.7^{\frac{1}{9}}$

$\large \implies i = 0.9611 - 1$

$\large \implies i = -0.0389 \ per \ year$

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