growth rate and annual yield

**sksksk** · September 21st 2007, 08:34 AM

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

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

**CaptainBlack** · September 21st 2007, 10:32 AM

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

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

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

RonL

**sksksk** · September 21st 2007, 10:47 AM

thank youuuuuuuu

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