Question

If an asset declines in value from $5,000 to $3,600 over six years, what is the mean annual growth rate (as a percent) in the asset's value over these six years? (Round your answer to four decimal places.)

Answer 1

Based on the fact that the asset declined in value from $5,000 to $3,600 over six years, the mean annual growth rate of the asset over those six years was -4.67%

What was the mean growth rate?

The mean growth rate over those years is the rate at which the asset had grown in value or the rate at which the asset had declined in value over a certain period of time.

The first thing to do is to find the change in the value of the asset over those six years:
= New value of asset - Old value of asset

= 3,600 - 5,000

= -$1,400

Now that you have the change in the value of the asset, you can find the mean growth rate as:

= (Change in value of asset / Original value of asset) / number of years that asset was used

Solving for the mean annual growth rate gives:

= (-1,400 / 5,000) / 6

= -0.28 / 6

= -0.46667

= -4.67%

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