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Math Help - income

  1. #1
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    income

    I need to know right now how to figure out a percentage number of the profit a theme park stock made from the last year and the last five years. The data I have is the close for Disney today, for example, which is 33.74, and the close exactly a year ago was 29.21, and 5 years ago it was 16.00. I can't think or remember how to make an accurate percentage of the difference between a year and five years. Someone please help...?
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  2. #2
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    Quote Originally Posted by BlueStar View Post
    I need to know right now how to figure out a percentage number of the profit a theme park stock made from the last year and the last five years. The data I have is the close for Disney today, for example, which is 33.74, and the close exactly a year ago was 29.21, and 5 years ago it was 16.00. I can't think or remember how to make an accurate percentage of the difference between a year and five years. Someone please help...?
    Percentage change in price in 1 year: (33.74 - 29.21)/29.21 *100

    Percentage change in price in 5 years: (33.74 - 16.00)/16.00 *100

    RonL
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  3. #3
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    15% and 110% respectively, right?

    Okay, now I have some new things to figure out. How do I predict what this stock will be worth in five years?

    Then I have to compare my results to investing $10,000 in a savings account that has an interest rate of 3.5% compounded annually for five years.

    Then, if I kept my stocks for five years, which investment would provide me with the most profit: my theme park or the savings account?


    I just need most of this cleared up for me in a strictly mathetmatical way.
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  4. #4
    Senior Member tukeywilliams's Avatar
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    So you have  A = P \left(1 + \frac{r}{n}\right)^{nt} .

    So:  A = 10000\left(1+ \frac{0.035}{1}\right)^5 which is the value of the savings account.

    The value of the stock would hypothetically be  33.74 + 33.74(1.10) = 70.854 .

    To predict the value of the stock in 5 years, I believe you have to use the % change in 5 years from the last part, multiply it by the current value, and then add it the new total. Then compare this value to what you get from the savings account. The savings account would provide the most profit. In practice however, the value of a stock is extremely hard to predict. The stock market is what is called a noisy system. Fixed mathematical equations aren't practical in modeling the value of a stock/ basket of stocks.
    Last edited by tukeywilliams; July 30th 2007 at 10:04 PM.
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  5. #5
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    How do you solve that savings account formula?
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  6. #6
    Senior Member tukeywilliams's Avatar
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    You have  10,000 principal, the interest rate is 3.5%, and its compounded years.

    So add up the numbers in the parentheses, take it to the fifth power, and multiply it by 10000.
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  7. #7
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    If I add 0.035 to 1 and divide it, that would be 1.035, and when I try to take it to the fifth power (or even second or third power, for that matter) there are way too many decimal places coming up, and way too small a number. Am I doing it wrong?


    ETA: Actually, is the answer 11,876?
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  8. #8
    Senior Member tukeywilliams's Avatar
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    Yeah thats right.
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  9. #9
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    Quote Originally Posted by tukeywilliams View Post
    To predict the value of the stock in 5 years, I believe you have to use the % change in 5 years from the last part, multiply it by the current value, and then add it the new total. Then compare this value to what you get from the savings account.
    Can you take me through this?
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  10. #10
    Senior Member tukeywilliams's Avatar
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    The value of the stock right now is  33.74 . In the past 5 years, the value of the stock has increased by  110 \% .

    So  110 \% of  33.74 is  33.74(1.10) . But this is how much the value of the stock has increased in 5 years. So we add this to  33.74 and get  33.74 +1.10(33.74) = 70.854 .
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  11. #11
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    Now, what do I make of it when I compare the stock value to the savings account? Is $70.85 just the price of one share, and I'd multiply this value by the number of shares I'd bought to get the real value to compare to the savings account?
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  12. #12
    Senior Member tukeywilliams's Avatar
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    Yeah thats the price of just 1 share. Then multiply this number by the number of shares you are buying, and compare this value to the value from the savings account. Obviously for 1 share, the savings account is more profitable.
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