Question

If an asset declines in value from $5,000 to $4,100 over nine years, what is the mean annual growth rate in the asset’s value over these nine years? Enter your answer as a percentage. If needed, round your answer to two decimal digits.

Answer 1

-2.18%

Explanation:

The mean annual growth rate of an investment over 'n' years is given by the following expression:

`r=((Present\ value)/(Initial\ value)) ^((1/n))-1`

For a 9-year investment with present value of $4,100 and initial value of $5,000, mean annual growth rate is:

`r=((4,100)/(5,000)) ^((1/9))-1\\r=-0.00218=-2.18\%`

The mean annual growth rate in the asset’s value is -2.18%