Investments in the stock market have increased at an average compound rate of about 5% since 1902. It is now 2012.
| a. |
If you invested $1,000 in the stock market in 1902, how much would that investment be worth today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
|
| Investment | $ |
| b. |
If your investment in 1902 has grown to $1 million, how much did you invest in 1902? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
|
| Present value | $ |
Explanation:
| Since we are assuming that it is currently 2012, 110 years have passed since 1902. |
a.
| $1,000 × (1.05)110 = $214,201.69 |
b. PV × (1.05)110 = $1,000,000
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