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04.07 Project Assignment: Work Independently

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karoline alvarez

on 9 June 2014

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Transcript of 04.07 Project Assignment: Work Independently

04.07 Exploring Linear and Exponential Growth

Me and some friends have started our own company. After the first few months, the profits are rolling in. It is time to start thinking about putting your money to work for you. I decide that investing $5,000 into some Certificates of Deposit (CDs) would be a beneficial move. With a CD, you lend your money to a third party, and after a set time, your money is paid back with interest. Before I start investing the company's money this way, I need to pitch it to my friends.

To show the value of the two CD's and the investors plans for the next five years I created a table.
In this function the average rate of change is labeled by 1.02. After working out the new function I was surprised at how much more pleasing the new result was. With the new CD the company would collect $5,520.40 after year 5 while my original 5-year CD would've gotten us simply $1,525.88 which is a pretty big gap.
As a total in the end the new CD would be much more profit and allow the family to use that money and buy more CD's with bigger profits that the first time. The wait to collect the money is longer and we would have to wait until after the 5-year CD is done but it would be worth it. Also the two year CD is simply a fast way to get cash and would be a bad decision in the long run.
To explain to my friends the investor's plan was a linear I brought up that the function was growing at a normal pace of 50. While I showed that the CD's are exponential functions by bringing it to their attention that the CD's are exponential functions by presenting how both were being multiplied by a similar ratio. The similar ratios were 0.5000 for the CD of 2-years and 1,2500 for the CD of 5-years.
With the investor's adding 50 dollars to what they already owed in exchange of the 5,000 dollars their rate charge was 50. For the 5-year CD during years 2-3 turned out to be $195.31, while during years 3-5 the average rate turned out to be $274.66
After having an investor come to my office and proposing to give me $50 extra on top of what he already owes me if I give him the $5000 I created a new function for this plan. The function I put together was f(x)=5000+50x.
To determine how much I will be paid when the CD matures I created functions to represent the 2-year and 5-year CD's. For the 2-year CD I created F(x)=500(0.5000)x and got me 1750 in total, while the 5-year CD I created of f(x)=500(1.2500)x and got me a total of 1525.88.
I research the highest interest rate for 2-year and 5-year CDs. After thorough research I found the California First Bank had 2-year CD's available with interest rates of 0.5000% and minimum investments of $500. My choice for 5-year CD's was also California First Bank with a 1.2500% and minimum investments of $500. Both of these were 5,000 or bellow which is the amount of money i wanted to spend.
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