Question

A share of ABC stock was worth $60 in 2005 and only worth $45 in 2010

Assuming that the decline in value continues at the same rate, use your answer to (b) to predict the value in 2020

Answer 1

To determine the prediction of ABC stock's value in 2020, first, we need to calculate the rate of decline between 2005 and 2010.

1. **Calculate the decline in value from 2005 to 2010:**
- Value in 2005: $60
- Value in 2010: $45
- Decline in value: \( 60 - 45 = 15 \) dollars

2. **Determine the number of years between 2005 and 2010:**
- \( 2010 - 2005 = 5 \) years

3. **Calculate the annual rate of decline:**
- Annual decline: \( \frac{15}{5} = 3 \) dollars per year

4. **Calculate the number of years from 2010 to 2020:**
- \( 2020 - 2010 = 10 \) years

5. **Calculate the total decline from 2010 to 2020:**
- Total decline: \( 3 \text{ dollars/year} \times 10 \text{ years} = 30 \) dollars

6. **Predict the value in 2020:**
- Value in 2020: \( 45 - 30 = 15 \) dollars

Thus, if the decline continues at the same rate, the predicted value of ABC stock in 2020 would be **$15**.