Find the percentage rate

  • #1
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Homework Statement


If an investment increased by 40% over 3 years and rose by the same percentage rate each of those years, what was the rate?

Homework Equations


new_value = old_value(1+r)^p

The Attempt at a Solution


Let value of the investment be 1000, then we have 1000(1+0.4) = 1000(1+r)^3, r = 0.1187

r seems reasonable to me, but I am not sure that is right.
 

Answers and Replies

  • #2
SammyS
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Homework Statement


If an investment increased by 40% over 3 years and rose by the same percentage rate each of those years, what was the rate?

Homework Equations


new_value = old_value(1+r)^p

The Attempt at a Solution


Let value of the investment be 1000, then we have 1000(1+0.4) = 1000(1+r)^3, r = 0.1187

r seems reasonable to me, but I am not sure that is right.
What is (1+r)3 for the rate you found?
 
  • #3
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What is (1+r)3 for the rate you found?
the investment is increasing at the same rate in 3 years, and we are looking for the rate,r. In order to get the value after 3 years which is already increase 40%, I think (1+r)^3 is the rate increase over 4 years. Thus, this would equal to 1+0.4
 
  • #4
SammyS
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the investment is increasing at the same rate in 3 years, and we are looking for the rate,r. In order to get the value after 3 years which is already increase 40%, I think (1+r)^3 is the rate increase over 4 years. Thus, this would equal to 1+0.4
You did get a value for r, Right?

Simple question:

With that value of r, what do you get for (1+r}3 ?
 
  • #5
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You did get a value for r, Right?

Simple question:

With that value of r, what do you get for (1+r}3 ?
I get 1.4
 
  • #6
SammyS
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I get 1.4
That corresponds to an increase of 40% .
 
  • #7
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That corresponds to an increase of 40% .
I am getting confusing about the question, the investment increased 0.4 in 3 years, and in this 3 years increasing by the same rate, that is how I understand the question.
 
  • #8
SammyS
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I am getting confusing about the question, the investment increased 0.4 in 3 years, and in this 3 years increasing by the same rate, that is how I understand the question.
At the end of three years, the investment should have increased by 40%.

You were to find the yearly rate necessary for that growth.

Checking your answer, it seems the % you found is correct.
 
  • #9
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At the end of three years, the investment should have increased by 40%.

You were to find the yearly rate necessary for that growth.

Checking your answer, it seems the % you found is correct.
Thank you for checking my answer and help me to understand the question in more detail
 

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