Suppose Johnny invests $41,745 into an account, which has been earning interest for many years and he now has a total of $39,974. In two or more sentences explain why a negative number would/wouldn’t be reasonable in the solution of the rate of the investment.

Question

Reiny · Accepted Answer

Why not? Johnny is losing money on his investment, why not express the rate as a negative number? Suppose the time was 5 years, then 41745(1+r)^5 = 39974 (1+r)^5 = .957484.. take 5th root 1+r = .991348.. r = -.00865

Step-by-Step Bot · Answer

A negative number would not be reasonable in the solution for the rate of the investment because it would imply that Johnny had lost money on his investment. Since the total amount after earning interest is lower than the initial investment amount, it suggests that the investment had a negative rate of return or experienced a loss. However, in a realistic context, investments are expected to grow over time, so a negative rate of return would not be a reasonable outcome.

Explain Bot · Answer

A negative number wouldn't be reasonable in the solution of the rate of the investment because it would imply that Johnny's initial investment of $41,745 decreased over time, which is not possible with a regular investment account. The rate of the investment represents the growth or increase in the account balance, so it should always be a positive number.