Suppose a man invested $300 at the end of 1900 in each of three funds that track
ID: 3350612 • Letter: S
Question
Suppose a man invested $300 at the end of 1900 in each of three funds that tracked the averages of stocks, bonds, and cash, respectively. Assuming that his investments grew at the rates given in the table to the right, approximately how much would each investment have been worth at the end of 2008?
Category Average Annual Return
Stocks 6.8%
Bonds 1.8%
Cash 0.7%
His investment in the fund tracking stocks would be worth approximately $ .
(Do not round until the final answer. Then round to two decimal places as needed.)
His investment in the fund tracking bonds would be worth approximately $ .
(Do not round until the final answer. Then round to two decimal places as needed.)
His investment in the fund tracking cash would be worth approximately $ .
(Do not round until the final answer. Then round to two decimal places as needed.)
Explanation / Answer
A = P(1+APR)^n
P = 300 , n = 108
a) stock
APR = 6.8% = 0.068
hence
A = 300 * ( 1 + 0.068)^108 = 365440.389834 = 365440.39
b) for bonds
A = 300 * ( 1 + 0.018)^108 =2060.0666 = 2060.07
c) for cash
A = 300 * ( 1 + 0.007)^108 =637.2415 = 637.24
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