Question

The stock price of one share in a certain company is worth $360 today. A stock analyst believes that the stock will lose 28 percent of its value each week for the next 3 weeks. The analyst uses the equation V=360(r)^t to model the value, V, of the stock after t weeks. What value should the analyst use for r?

Answer 1

r = 72% = 0.72

Explanation:

This case is a compound interest case. But the interest is accumulated negatively every week.

Total Amount Compounded with compound interest is calculated as

A = P (1 + r)ᵗ

P = principal/initial amount invested = $360

r = rate of increase weekly = -28% = - 0.28

t = time period that passes = t

A = 360 (1 - 0.28)ᵗ

A = 360 (0.72)ᵗ

Hope this Helps!!!