Answer:
[tex]Growth\ Rate = 0.2000[/tex] --- Year 1 to 2
[tex]Growth\ Rate = 0.3333[/tex] --- Year 2 to 3
[tex]Growth\ Rate = 0.0625[/tex] --- Year 3 to 4
[tex]Average\ Growth\ Rate = 19.86\%[/tex]
Step-by-step explanation:
Given
[tex]\begin{array}{cc}{Year\ 1} & {100} & {Year\ 2} & {120} & {Year\ 3} & {160} & {Year\ 4} & {170} \ \end{array}[/tex]
Solving (a): Growth Rates between each year
For Year 1 to 2.
[tex]Growth\ Rate = \frac{Year\ 2 - Year\ 1}{Year\ 1}[/tex]
[tex]Growth\ Rate = \frac{120-100}{100}[/tex]
[tex]Growth\ Rate = \frac{20}{100}[/tex]
[tex]Growth\ Rate = 0.2000[/tex]
For Year 2 to 3.
[tex]Growth\ Rate = \frac{Year\ 3 - Year\ 2}{Year\ 2}[/tex]
[tex]Growth\ Rate = \frac{160-120}{120}[/tex]
[tex]Growth\ Rate = \frac{40}{120}[/tex]
[tex]Growth\ Rate = 0.3333[/tex]
For Year 3 to 4.
[tex]Growth\ Rate = \frac{Year\ 4 - Year\ 3}{Year\ 3}[/tex]
[tex]Growth\ Rate = \frac{170-160}{160}[/tex]
[tex]Growth\ Rate = \frac{10}{160}[/tex]
[tex]Growth\ Rate = 0.0625[/tex]
Solving (b): The average growth rate
This is calculated as by calculating the mean value of the growth rates in (a)
[tex]Average\ Growth\ Rate = \frac{1}{3}(0.2000 + 0.3333 + 0.0625)[/tex]
[tex]Average\ Growth\ Rate = \frac{1}{3}(0.5958)[/tex]
[tex]Average\ Growth\ Rate = \frac{1}{3}*0.5958[/tex]
[tex]Average\ Growth\ Rate = 0.1986[/tex]
Convert to percentage
[tex]Average\ Growth\ Rate = 0.1986 * 100\%[/tex]
[tex]Average\ Growth\ Rate = 19.86\%[/tex]
