Question

Your parents spent $6,200 to buy 500 shares of stock in a new company 13 years ago. The stock has appreciated 10 percent per year on average. What is the current value of those 500 shares

Answer 1

Answer:

$21,405

Explanation:

6200 for 500 shares

Each share worth = 6200/500 = $12.40

This share price (13 years ago) increased by 10% per year. So this is compound growth for 13 years. The formula is:

$F=P(1+r)^t$

Where F is the future value (we want this)

P is the initial value of stock (12.4)

r is the rate of appreciation (10% = 0.1)

t is the time in years (t = 13)

So, the value of share is:

$F=12.4(1.1)^{13}\\F=42.81$

So, 500 shares now would be worth:

42.81 * 500 = $21,405

Answer 2

The current value of those 500 shares is $21,404.08.

Here, we are to calculate the Current value of the 500 shares bought by the parent.

• The  current value of those 500 shares will be derived by using this formula PV*(1+r/100)^n

Given Information

$6,200 spent to buy 500 shares

n = 13 years ago.

Stock appreciated 10%

Current value of the shares = $6,200*(1 + 10%)^13

Current value of the shares = $6,200*(1.10)^13

Current value of the shares = $6,200 * 3.45227121

Current value of the shares = $21,404.08

Therefore, the current value of those 500 shares is $21,404.08.

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