An investment grows from $2,000 to $2,750 over the period of 10 years. What average annual growth rate will produce this result?
What will be an ideal response?
First we determine the overall percentage change in the investment is 37.5%, [(2,750 - 20000/2000] × 100 = 37.5. Next, we ask what annual growth rate over 10 years produces this result? We can determine this by using the following: (1 + i)10 = (1.375); which with a little manipulation turns into: i = (1.375)1/10 - 1; which says i = .03236, or an annual growth rate of 3.24% produces this result. Notice this is different than the answer you would obtain by simply dividing 37.5% by 10.
You might also like to view...
The agreement between the United States, Mexico, and Canada that sought to lower trade barriers is known as
A) the General Agreement on Tariffs and Trade. B) the North American Free Trade Agreement. C) the World Trade Organization. D) the Smoot-Hawley Tariff Act. E) the New World Free Trade Agreement.
The figure above shows the market supply and market demand for pizza
a) What is the efficient quantity of pizzas? b) If 70,000 pizzas are produced, what area represents the deadweight loss? c) Why does the deadweight loss in part (b) occur? d) If 20,000 pizzas are produced, what area represents the deadweight loss? e) Why does the deadweight loss in part (d) occur?
A monopolist will maximize profits by producing a quantity specified by setting marginal revenue equal to marginal cost.
Answer the following statement true (T) or false (F)
Fannie Mae and Freddie Mac:
a. Are government sponsored entities (GSE) b. Have a mandate to develop a secondary market in U.S. mortgages. c. Suffered severe economic losses and are now under conservatorship. d. All of the above.