# growth rate and annual yield

• Sep 21st 2007, 08:34 AM
sksksk
growth rate and annual yield
Find the effective annual yield and the continuous growth rate if Q= 5500e^.19t

having trouble understanding this section of the chapter. please help!
• Sep 21st 2007, 10:32 AM
CaptainBlack
Quote:

Originally Posted by sksksk
Find the effective annual yield and the continuous growth rate if Q= 5500e^.19t

having trouble understanding this section of the chapter. please help!

The annual yield is the return (expressed as a decimal fraction or percentage) over 1 year:

Initial investment $\displaystyle = 5500 \ e^{0.19 \times 0}=5500$
Value after 1 year $\displaystyle = 5500 \ e^{0.19 \times 1}\approx 6651$

Therefor the effective annual yield is = $\displaystyle \left[\frac{6651-5500}{5500}-1\right]\times 100 = 20.9 \%$

The continuous growth rate is the constant in the exponential so in this case is $\displaystyle 0.19$ or $\displaystyle 19 \%$

RonL
• Sep 21st 2007, 10:47 AM
sksksk
thank youuuuuuuu