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?

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%

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%