Can someone refresh my memory?!!

C

CalebsMomma

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Jul 13, 2009
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Ok, so I know I have dealt with these before, but for some reason, I can't seem to recall how exactly to do it....
So trying to find annual return on an investment. I know that r=(S/P)^1/n-1.
It's the fraction that's confusing me.

So I know from my problem that

r=(24,780/10,000)^1/5-1
r= (2.478)^1/5-1
r= (1sqrt 2.478)5

Here's where I am lost, since usually everything with one is itself, does it become...

r=(sqrt2.5)^5
which then becomes r=1.6^5
which equals r=10.5 ?????

Or am I wrong?
 
CalebsMomma said:
Ok, so I know I have dealt with these before, but for some reason, I can't seem to recall how exactly to do it....
So trying to find annual return on an investment. I know that r=(S/P)^1/n-1.
It's the fraction that's confusing me.

So I know from my problem that

r=(24,780/10,000)^1/5-1
r= (2.478)^1/5-1
r= (1sqrt 2.478)5

Here's where I am lost, since usually everything with one is itself, does it become...

r=(sqrt2.5)^5
which then becomes r=1.6^5
which equals r=10.5 ?????

Or am I wrong?
Click to expand...

I notice that you have NOT gotten a response, and I think it may be because your problem is not CLEAR.

Is " 1 / 5 - 1" the exponent? And if so, does that mean 1 / (5 - 1)??

We need to see grouping symbols here, so we can be sure of "what belongs where."

Please type the ENTIRE problem exactly as it appears in your assignment. We need to know what S, P, n, and r represent.

Maybe if your problem is clearly stated, someone will be able to help you with it.
 
OK, I can see where that could be confusing! My apologies.
Top Bond Fund. It says that the average annual return (r) is determined by the initial investment (P), the number of years (n) and the amount that the it is worth after (n) years which is then (S).
I know from the my text that:
The text also gave us the set up of the equation as follows:
r=(S/P)^(1/n) -1

So r=?
P(initial investment)= $10,000
n(number of years)= 5
S(amount it's worth after "n" years)= $24,780

So I know from my problem that

r=(24,780/10,000)^(1/5)-1
r= (2.478)^1/5-1
r= (1sqrt 2.478)5

Here's where I am lost, since usually everything with one is itself, does it become...

r=(sqrt2.5)^5
which then becomes r=1.6^5
which equals r=10.5 ?????

Or am I wrong?
 
CalebsMomma said:
> The text also gave us the set up of the equation as follows:
> r=(S/P)^(1/n) -1

That's correct. Comes from P = S(1 + r)^n, which is the future value of S at rate r after n years; this way:
P = S(1 + r)^n
(1 + r)^n = P/S
1 + r = (P/S)^(1/n)
r = (P/S)^(1/n) - 1

> P(initial investment)= $10,000
> n(number of years)= 5
> S(amount it's worth after "n" years)= $24,780
> r=(24,780/10,000)^(1/5)-1 .................YES Momma! Well done, and good bracketing job!
> r= (2.478)^1/5-1 .............................WHY did you leave the brackets off the 1/5? Bad Momma!
> r= (1sqrt 2.478)5 ............................HOW did you ever come up with such a mess :shock:

(2.478)^(1/5) = 1.199002974.... (Don't you have a calculator?)
1.19900274... - 1 = .199002974... : that's 19.9 % annual return ; kapish?

For your info, you can now prove that with 5 calculations:
10000.00 * 1.199 = 11990.00
11990.00 * 1.199 = 14376.01
14376.01 * 1.199 = 17236.83
17236.83 * 1.199 = 20666.97
20666.97 * 1.199 = 24779.69 : short .31 cents (due to not using the full 1.199002974)
Click to expand...
 
It was the fractional power that was messing with me! LOL And I do have a calculator, but I guess I'm not smart enough to operate it cause it kept saying error when I tried to do the whole fraction thing!! LMAO But I greatly appreciate the help and this site is a GodSend, I will recommend it to everyone I know!!!
Thanks to all you who take the time to help!! :D
 
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