inexplicable.ashes wrote:I am unsure as to what the difference is between an annual growth rate and a continuous growth rate and how to reflect the difference in a formula.
Ouch! They were supposed to have given
you those formulas (and
The "annual" (or any other fixed time period) growth is supposed to use the compound-interest sort of formula:. . . . .
...where "A" is the ending amount, "P" is the beginning amount, "r" is the rate of growth (or decay) for a unit of time (usually "annual", so "yearly"), "n" is the number of compoundings per unit time (usually years), and "t" is the total amount of time (expressed in the same time units).
In your case, P = 886,362,000, r = 0.016, n = 1, and t = 2001 - 1992 = 9.
For "continuous" growth, you use the "continously compounded" form, given in terms of the natural exponential "e":. . . . .
...where "A", "P", "r", and "t" are defined as previously, and "e" is just the natural exponential
. You'd find your answer using the same values, but plugging them straight into your calculatur. (You'll probably be using a "second" function for the key labelled "LN".)