For a stock price that was initially $55.00,what is the price after 4 years if the continuously compounded returns for these 4 years are 4.5%,6.2%,8.9%,-3.2%?
A) $64.80
B) $74.80
C) $84.80
D) $94.80

Question

Quizplus · Accepted Answer

The price after 4 years can be calculated using the formula for continuously compounded returns: $P = P_0 e^{(r_1+r_2+r_3+r_4)}$, where $P_0$ is the initial price and $r_1, r_2, r_3, r_4$ are the annual return rates. Plugging in the values: $P = 55 \times e^{(0.045+0.062+0.089-0.032)} = 55 \times e^{0.164} \approx 64.80$.

For a Stock Price That Was Initially $55