can anyone help me with a rule for rate of appreciation? I have a rule except i dont think im putting it into my calculator right i keep getting overally large numbers.
Thanks

Can you be more specific

RonL

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well my question is: the value of a stamp increases from $700 to $1000 in 2 years. What is the rate of appreciation?
Sorry i was a little late replying

my formula is: n ^(fv/pv)+1

n=time
^ = square root sign (cant find one on the keyboard)
fv= future value
pv=present value

When i put my above values in i get this: 2^(1000/700)+1 = 3.39

The answer on my sheet is actually 19.52% p.a.
How do i get that?

Are you sure that formula is correct?

I can't get the 19.52% in either event, but is the formula:


or



In any event this isn't an equation. What's this expression equal to?

-Dan

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"I must not fear. Fear is the mind killer. Fear is the little death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain." - The Litany Against Fear, "Dune" by Frank Herbert

Hello,

you wrote: "...my formula is: n ^(fv/pv)+1"

I understand your explanations that you want to calculate:



The 2nd root is the same as the good ol' square-root.



Look at the increase: You find 0.1952286 and that's the same as 19.52%.

By the way: I don't understand what you want to calculate, I can only show you how to get the result.

EB

Here is one way.

I don't know your formula but a few play showed it came from the simple formula
A = P[(1+r)^n]
where
A = total amount in n years-----------------your Fv
P = initial amount, or amount in zero year----your Pv
r = rate of interest per year------------------your rate of appreciation
n = number of years

------------
Since it is vacation time, lots of sparetime, let us review how that simple formula was derived.

0 year:
Ao = P

After 1 year:
A1 = P +P*r = P(1+r)

After 2 years:
A2 = P(1+r) + [P(1+r)]*r = [P(1+r)](1+r) = P[(1+r)^2]

....After n years:
An = P[(1+r)^n]

----->>> "Ao, A1, A2....An" are read "A sub 0", "A sub 1", "A sub 2"...."A sub n"
----------------------------

So you have
Fv = (Pv)[(1+r)^n]
Divide both sides by Pv,
(Fv)/(Pv) = (1+r)^n
To isolate r, get the nth roots of both sides,
[(Fv)/(Pv)]^(1/n) = 1+r
Hence,
r = [(Fv)/(Pv)]^(1/n) -1 ---------------(i), it is minus 1.

Yours is +1, that's why you're getting wrong answers from your calculator.

So, with n=2,
r = [1000/700]^(1/2) -1
r = 1.1952 -1
r = 0.1952
r = 19.52 percent ---------------answer.

Nicely done!

-Dan

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"I must not fear. Fear is the mind killer. Fear is the little death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain." - The Litany Against Fear, "Dune" by Frank Herbert