Hunter took out a $3,500 loan with interest to pay for some business supplies. He will repay the loan in 3 years with monthly pa
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The capital formation of the investment function over a given period is the
accumulated capital for the period.
- (a) The capital formation from the end of the second year to the end of the fifth year is approximately <u>298.87</u>.
- (b) The number of years before the capital stock exceeds $100,000 is approximately <u>46.15 years</u>.
Reasons:
(a) The given investment function is presented as follows;
(a) The capital formation is given as follows;
From the end of the second year to the end of the fifth year, we have;
The end of the second year can be taken as the beginning of the third year.
Therefore, for the three years; Year 3, year 4, and year 5, we have;
The capital formation from the end of the second year to the end of the fifth year, C ≈ 298.87
(b) When the capital stock exceeds $100,000, we have;
Which gives;
The number of years before the capital stock exceeds $100,000 ≈ <u>46.15 years</u>.
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