Question

Three years ago, Jolene bought $550 worth of stock in a software company. Since then the value of her purchase has been increasing at an average rate of 10 1 2 % per year. How much is the stock worth now? (Round each money calculation you make to the nearest cent.)

Answer 1

To calculate the current value of Jolene's stock, we can use the compound interest formula. The stock is currently worth approximately $706.55.

Step-by-step explanation:

To calculate the current value of Jolene's stock, we need to apply the compound interest formula: A = P(1 + r)^n, where A is the final amount, P is the initial amount, r is the interest rate per period, and n is the number of periods.

From the given information, Jolene bought $550 worth of stock three years ago, and the value has been increasing at an average rate of 10 1/2% per year. We can convert this percentage to a decimal by dividing 10 1/2 by 100, which gives 0.105.

Plugging in the values into the formula, we have A = $550(1 + 0.105)^3. Evaluating this expression, we find that the stock is currently worth approximately $706.55.