Question

Growth and Decay

Dave bought a new car 8 years ago for $8400. Tobuy a new car comparably equipped now would cost $12,500. Assuming a steady rate of increase, what was the yearly rate of inflation in car prices over the 8-year period?

Is there an equation and could someone post the answer and (if someone could post the steps)?

Answer 1

8400 + 8x = 12500
8x = 4100
x = $512.50 (amount of inflation per year)

Note that you cannot convert this to percent rate because it wouldn't be steady. For the first year, 512.5/8400 = 6.1%. For the second year, the car is going to cost 8912.5, and 512.5/8912.5 = 5.75%. And so on...