The value of an investment increases by 1.8% each month. a What is the 5-month p

Question

The value of an investment increases by 1.8% each month. a What is the 5-month percent change? 09% O 0.36% O 9.33096 18.896% ONone of the above b. The value of the investment on August 1, 2010 is how many times as large as the value of the investment on March 1, 2010 Preview cThe value of the investment on June 1, 2011 is how many times as large as the value of the investment on June 1, 2010? Preview d. What is the 1-year growth factor? Preview e. What is the 3-year growth factor? Select all that apply 1.2387 + 3 1.018-3 1.2387.3 (( 1.018)12) 1.01830 None of the above

Explanation / Answer

1 month percent increase = 1.8%

5 month percent increase = (1.018)^5

= 1.09329

hence, 5 month percentage change = (1.09329 - 1)*100

= 9.33 %

b) let the value of investment in march 2010 = x

value of investment in april 2010 would be x + .018 x = x ( 1.018)

value of investment in august 2010 would be x (1.018)^5

so it is (1.018)^5 times large than march 1 2010

c) in june 2011 it would be (1.018)^12 times as large as june 1 2010

d) 1 year growth factor = 1.23872

e) 3 year growth factor = ((1.018)^12)^3

or (1.018)^36

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