Question

In 2016, the automobile industry announced the average vehicle selling price was $44,491. Five years earlier, the average price was $29,380.

  

What was the annual percentage increase in vehicle selling price? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Here, we need to calculate CAGR (Compounded Annual Growth Rate).

First, let us know what is CAGR:   It is the growth rate which takes results in final value or investment when we assume that the investment or value is compounding over the time period. It is a useful measure of growth over multiple time periods.

The formula for CAGR = (Ending value/Beginning value)^(1/n)-1

Now in the question, Ending value (2016) = 44,491

Begining value (2011) = 29380

n = 5

So CAGR = (44491/29380)^(1/5)-1 = 0.0865 or 8.65%