Exponential Growth

Question

In 2008, the median price for a compact car was $16,800. If the rate of increase is assumed to be 4% per year. What can we expect the price of such a car to be in 2010?

Answer 1

A simple way

 

In 2009

16800(1.04) = 17,472

 

In 2010

17472(1.04) = 18,170.88

 

The formula way

 

A = A₀(r)²

A = 16800(1.04)²

A = 16800(1.0816)

A = 18170.88