Question

A stock market analyst observes the following for the price of two stocks that he owns, one of which is increasing at an exponential rate (geometric) and the other is increasing in a linear fashion (arithmetic).
Stock A: Equation: an = 15n + 130, where an is the value of the stock and n is the number of years.


Year Price
1 $145.00
2 $160.00
3 $175.00
4 $190.00
5 $205.00


Stock B: Equation: an = 36(1.09)n − 1, where an is the value of the stock and n is the number of years.

Year Price
1 $36.00
2 $39.24
3 $42.77
4 $46.61
5 $50.82


Assuming these stock values continue to increase in the same manner until retirement, which stock option is worth more in 50 years and how much more is this stock worth per share?


OPTIONS:
A) Stock B is worth more in 50 years, $1,575.84 more per share
B) Stock A is worth more in 50 years, $1,364.08 more per share
C) Stock B is worth more in 50 years, $1,796.87 more per share
D) Stock A is worth more in 50 years, $880.00 more per share

Answer 1

In 50 years  stock A realises 15*50 + 130  = $880

in 50 yeras stock B  gives  50(1.09)^50 = $2676.87

2676.87 - 880 = $ 1796.87 / share

Its C