Question

Sarah invested £12000 in a unit trust 5 years ago, the value of the unit trust increased by 7% per annum for each of the last 3 years. Before this the price had decreased by 3% per annum. Calculate the current price of the unit trust

Answer 1

Answer:

The current price of the unit trust =  £13,831.72

Step-by-step explanation:

Since it increased 7% per annum in last three years and decreased by 3% per annum before that, it implies that the unit trust decreased by 3% per annum for the first 2 years and then increased by 7% per annum for the next 3 years in the total 5 year period

The invested after 2 years = 12,000*(1-0.03)^2 = £11,290.8

This amount then grows by 7% for the next 3 years making it = 11,290.80*(1+0.07)^3 =  £13,831.7155 = £13,831.72 (Rounded to 2 decimals)

The current price of the unit trust =  £13,831.72 (Rounded to 2 decimals)