What is (1+r)3 for the rate you found?HaLAA said: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.
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+0.4SammyS said:What is (1+r)3 for the rate you found?
You did get a value for r, Right?HaLAA said: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
I get 1.4SammyS said:You did get a value for r, Right?
Simple question:
With that value of r, what do you get for (1+r}3 ?
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.SammyS said:That corresponds to an increase of 40% .
At the end of three years, the investment should have increased by 40%.HaLAA said: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.
Thank you for checking my answer and help me to understand the question in more detailSammyS said: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.