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Mathematics

1 answer:

BaLLatris [955]2 years ago

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a) The compound interest equation is $C = 4250 \cdot 0.9675^{t}$ .

b) There is an approximate loss of $ 987.16.

c) The stock will take approximately 12.979 to decrease by half.

<h3>How to find stock losses by compound interest model</h3>

Compound interest model represents the gain of a deposit as a function of the number of periods and initial amount. The model is represented below:

$C = C_{o}\cdot (1+r)^{t}$ (1)

Where:

$C_{o}$ - Initial capital, in monetary units.
$r$ - Interest rate.
$t$ - Period number.
$C$ - Current capital, in monetary units.

Capital decreases in time when interest rate is a negative number. The equation that models the situation is $C = 4250 \cdot 0.9675^{t}$ and the current capital after eight years is:

C = 4250 · 0.9675⁸

C = 3262.84

That represents an approximate loss of $ 987.16.

And the number of periods required to decrease the capital by half is:

$2125 = 4250 \cdot 0.9675^{t}$