A large private hedge fund contains a variety of assets including restaurants, shopping malls, newspapers, nursing homes, and apartment buildings. Financial analysts estimate the total value to be Po = 6.4 + 0.9 billion USD. They also estimate the assets will appreciate in value at a rate ofr= 4.2 ± 1.8 %/year. Assume the growth is exponential such that P = P,e" (1) where t is time in years. a) Calculate the value of the assets P and its uncertainty Up after t = 6 years. Report your answer in the form "P ± Up billion USD". b) Which contributes more to the uncertainty Up? The uncertainty in the initial value Po or the uncertainty in the growth rate r?
A large private hedge fund contains a variety of assets including restaurants, shopping malls, newspapers, nursing homes, and apartment buildings. Financial analysts estimate the total value to be Po = 6.4 + 0.9 billion USD. They also estimate the assets will appreciate in value at a rate ofr= 4.2 ± 1.8 %/year. Assume the growth is exponential such that P = P,e" (1) where t is time in years. a) Calculate the value of the assets P and its uncertainty Up after t = 6 years. Report your answer in the form "P ± Up billion USD". b) Which contributes more to the uncertainty Up? The uncertainty in the initial value Po or the uncertainty in the growth rate r?
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Transcribed Image Text:A large private hedge fund contains a variety of assets including restaurants,
shopping malls, newspapers, nursing homes, and apartment buildings. Financial
analysts estimate the total value to be Po = 6.4 + 0.9 billion USD. They also estimate
the assets will appreciate in value at a rate of r = 4.2 ± 1.8 %/year. Assume the
growth is exponential such that
P = P,e"
(1)
where t is time in years.
a) Calculate the value of the assets P and its uncertainty Up after t 6 years. Report
your answer in the form "P + Up billion USD".
b) Which contributes more to the uncertainty Up? The uncertainty in the initial
value Po or the uncertainty in the growth rate r?
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