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

Stock A: Equation: an = 15n + 153, where an is the value of the stock and n is the number of years.

YearPrice

1$168.00

2$183.00

3$198.00

4$213.00

5$228.00

Stock B: Equation: an = 24(1.08)n − 1, where an is the value of the stock and n is the number of years.

YearPrice

1$24.00

2$25.92

3$27.99

4$30.23

5$32.65

Assuming these stock values continue to increase in the same manner until retirement, which stock option is worth more in 50 years and how much more is this stock worth per share?

Stock B is worth more in 50 years, $139.26 more per share

Stock A is worth more in 50 years, $367.08 more per share

Stock B is worth more in 50 years, $1,042.26 more per share

Stock A is worth more in 50 years, $903.00 more per share

Not C

failurewithasmile
Apr 14, 2017

#1**0 **

Woa, woa!!! Slow down!!!

Your posting questions really fast, but we cant do all of your work for you!

I'de be happy to help with a couple......

MysticalJaycat
Apr 14, 2017

#5**+2 **

You need to replace the variable in each of the equations with the value you know (n = 50), and compare the two answers.

In the first case: a_{n} = 15n + 153 ---> Since n = 50: a_{n} = 15(50) + 153 = 903.00

In the second case: a_{n} = 24(1.08)^{n-1} ---> Since n = 50: a_{n} = 24(1.08)^{49} = 1042.26

Subtract, and you will have yur answer.

geno3141
Apr 14, 2017