In 1930, the highest paid player in major league baseball was Babe Ruth of the New York Yankees, with an annual salary of $80,000. In 2005, the highest paid player in major league baseball player was Alex Rodriguez, also of the New York Yankees, with a salary of $25,000,000. What was the average annual rate of growth in the top baseball salary over this time period?
A) 7.96%
B) 18.70%
C) 3.31%
D) 4.17%

Question

Quizplus · Accepted Answer

The average annual rate of growth can be calculated using the formula:r = (FV/PV)^(1/n) - 1where:r = annual rate of growthFV = future valuePV = present valuen = number of yearsIn this case, the present value is $80,000, the future value is $25,000,000, and the number of years is 75 (2005 - 1930).Plugging these values into the formula, we get:r = (25,000,000/80,000)^(1/75) - 1r = 7.96%Therefore, the average annual rate of growth in the top baseball salary over this time period was 7.96%.

In 1930, the Highest Paid Player in Major League Baseball