Question

2. Some investments in the stock market have earned 10% annually. The total value of the investment, A, at this rate can be found using A=P(1.10)^n, where P is the initial value of the investment, and n is the number of years the money is invested. If $1,000 is invested in the stock market at this annual rate of return, what is the expected total value after 18 years??

A.$ 4,054.47
B.$ 5,559.92
C.$ 18,700.00
D.$ 19,800.00

Answer 1

\[P=1000\]\[n=18\]\[A=P(1.10)^n = 1000(1.10)^{18} =\]

A hint for working this one in your head: a 10% rate of return doubles your money after about 7 periods. (\(1.1^7\approx 1.95\))

Answer 2

so would i just multiply 1000(1.10)^18 ? @whpalmer4

Answer 3

Yep, it's a simple "plug-n-chug" problem...

Answer 4

Remember the operator precedence: you do 1.10^18 first, then multiply it by 1000.

Answer 5

It would be nice if it worked the other way, as your investment would then be worth $5559917313492231481000000000000000000000000000000000000 :-)

Answer 6

lol so i did that and i got something like 72,225,966.051 ... is that right or in the right direction

Answer 7

No, the correct answer is among your answer choices.

What do you get for 1.10^18?

Answer 8

oohhh lol nevermind i punched the numbers in wrong my bad is it B? because thats what i got

Answer 9

B is correct.

Answer 10

yes finally lol thank you so much

Answer 11

Working from my "back of the envelope" hint: if we double every 7 years, we've got 2 complete doublings (1000->2000->4000) plus about half of another doubling, and B is the only answer nearby.

Answer 12

okay i see, thanks

Answer 13

always good to be able to do a sanity check estimate on your answers...

Answer 14

you're right lol