Final Exam F Microsoft E HomeInsertPage LayoutFormulas Data Review View s Cut 1

Question

Final Exam F Microsoft E HomeInsertPage LayoutFormulas Data Review View s Cut 1 Copy B 1 -li - 0 ,-- da Merge & Center. $ % , isa 8 C l. Insert Delete Format Paste Conditional Format Cell Formatting, as Table Styles Format Painter I U a Sort & Find & 2 Clear Filter Select Ed ting Clipboard Alignment Cells E17 300 0 Over the ten year period between 2002 and 2012, the price of gold increased from $300 to $1,800 an ounce Estimate the average inflation in gold prices over this ten-year period. A stock investment has doubled in value while realizing 10% annual interest. 12 Estimate the number of years it took the stock to double in value 13 15 inil, Cost 17 Annual interest rate 300 1980 19 21 4 1800 27 11 1Overview, Q1 | Q 10:17 AM

Explanation / Answer

2002 2012 Price of gold per ounce $300 $1800 Future Value = Present Value*((1+r)^t) where r is the interest rate and t is 10 1800 = 300*(1+r)^10 (1+r)^10 = 6 1+r = 6^(1/10) 1+r = 1.196231 r = .1962 r = 19.62% is the average inflation in gold prices over 10 years Lets say we start with 1000 and then we get a 10% interest annually The value then becomes 2000 Future Value = Present Value*((1+r)^t) where r is 10% and t is the time period 2000 = 1000*(1.10)^t 1.10^t = 2 taking natural log on both sides tln1.10 = ln 2 t*.0953 = .6931 t = 7.27 years is the number of years it took for the stock to double in value.

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