You own a mutual fund that grows from $1200 to $1500 in 1 year. a.) What is
Question:
You own a mutual fund that grows from $1200 to $1500 in 1 year.
a.) What is the growth factor that describes this investment (format as a number to 2 decimal places)? What is its annual percentage growth rate (format as % to zero decimal places)?
b.) Complete the table of values expressing the balance in your fund through year 10, assuming that this percentage growth rate remains constant; use the idea of a “recursive formula” to determine each year's value from the previous.
0 years | 1200 |
1 year | 1500 |
2 years | ? |
3 years | ? |
4 years | ? |
5 years | ? |
6 years | ? |
7 years | ? |
8 years | ? |
9 years | ? |
10 years | ? |
c.) Graph the table values from partbas a well-labeled scatterplot; includean exponential trendline with its equation. Displaythe graph to the right of these boxes.
d.) What is the continuous growth rate for the investment? Type in as a number to 4 decimalplaces and as a percentage to 2 decimal places.
e.) Given the input cell for years (C24 C24=25), create a formula for the value of your mutual fund using the initial value (C8 C8=7152.56) and annual growth factor (C4=300). Format as currency.
f.) Interpret the annual growth rate from part a by filling in the blanks in the following sentence:
The___i____ (unit) is changing by ____ii_____ (number)per__iii___ (unit).
g.) Given the input cell for years (C35 C35=25), create a formula for the value of your mutual fund using the initial value (C8=7152.56) and continuousgrowth rate (C21 C21=0.25). Format as currency. Note: To raise eto a power use the EXPfunction.
h.) Interpret the continuous growth rate by filling in the blanks in the following sentence:
The___i____ (unit) is changing continuously by ____ii_____ (number)per__iii___ (unit).
i.)You should notice that the two formulasyou used to obtain the amounts in the mutual fund differ -- in C25, using the growth factor (C4), and in C36, using the continuous growth rate (C21). But both formulas should describe the same account. Which of these formulas is more exact? Your answer in C38 should be either 1or 2:
1. the one using the growth factor in C4.
2. the one using the continuous growth rate in C21.
Personal Finance Turning Money into Wealth
ISBN: 978-0134730363
8th edition
Authors: Arthur J. Keown