Question

An investment made in the stock market decreased at a rate of 1.2% per year for 25 years. What is the current value of the $100,000 investment? Include your calculations in your final answer. Please show your work.

Please use the A = P (1 + r/n) ^(nt) formula

Answer 1

Use A = P (1 + r/n) ^(nt). Assuming that we're dealing with years here, n = 1, so we have

A = P (1 + r) ^(t), where r is the interest rate as a decimal fraction.

The investment decreases in value, so the common ratio r is (1.000-0.012), or 0.988.

Thus, A = $100,000* (0.988) ^25 = $73947.52 is the current value, after 25 years.