Question

Please help!!! An investment is made in the stock market decreased at a rate of 4% per year for 5 years. What is the current value of the 1,000,000 investment? Include your calculations in your final answer.

Answer 1

The current value is about $815,372.70

Explanation:

This is an exponential decay problem. The formula is:

`F=P(1-r)^t`

WHere

F is the future amount (after some time, here it is after 5 years)

P is the original amount invested (it would be P = 1,000,000)

r is the rate of decrease, in decimal (here, 4% per year means 0.04 )

t is the time period (here, it is after 5 years, so t = 5)

plugging in all the info we get:

`F=P(1-r)^t[\\F=1,000,000(1-0.04)^5\\F=1,000,000(0.96)^5\\F=815,372.70`