Rather than changing by a constant amount each period as with the gradient series, the geometric series changes by a constant percentage each period.
Rather than changing by a constant amount each period as with the gradient series, the geometric series changes by a constant percentage each period.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Can some one please help me to solve this question? Please and thank you!!
Transcribed Image Text:Rather than changing by a constant amount each period as with the gradient series,
the geometric series changes by a constant percentage each period.
a) True
b) False
Expert Solution
Step 1
Gradient Series:
The payments are uniformly spaced by a constant amount from one period to the next period in arithmetic series.
For example, the Year 1 payment is $500, and the further payment increases by $100 (constant amount).
Therefore, Year 2 payment is $600 ($500 + $100) and Year 3 payment is $700 ($600 + $100) & so on for later payments.
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