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

Question

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.