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A stock market analyst observes the following for the price of two stocks that he owns, one of which is growing in a linear fashion (arithmetic) and the other of which is growing at an exponential rate (geometric).

Stock A: Equation: an = 15n + 50, where an is the value of the stock and n is the number of years
 

YearPrice

1$65.00

2$80.00

3$95.00

4$110.00

5$125.00



Stock B: Equation: an = 13(1.11)n − 1, where an is the value of the stock and n is the number of years

 

YearPrice

1$13.00

2$14.43

3$16.02

4$17.78

5$19.74



Assuming these stock values continue to grow in the same manner until retirement, which stock option will be worth more in 40 years, and how much more (rounded to the nearest cent) will this stock be worth per share?

 

A.) Stock A; $650.00

B.) Stock B; $111.27

C.) Stock A; $95.65

D.) Stock B; $761.27

Redsox123  May 11, 2017
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A stock market analyst observes the following for the price of two stocks that he owns, one of which is growing in a linear fashion (arithmetic) and the other of which is growing at an exponential rate (geometric).

 

 

Stock A:

\(a_n = 15n+50 \\ a_{40} = 15\cdot 40 + 50 \\ a_{40} = $650 \)

 

Stock B:

\(a_n = 13\cdot 1-11^{n-1} \\ a_{40} = 13\cdot 1-11^{39} \\ a_{40} = $761.27 \)

 

Assuming these stock values continue to grow in the same manner until retirement,

which stock option will be worth more in 40 years,

and how much more (rounded to the nearest cent) will this stock be worth per share?

 

Stock B;  $761.27- $650 = $ 111.27

 

laugh

heureka  May 11, 2017

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