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Question 544909: The value of stock ABC Corporation has been increasing by the same fixed dollar amount each year. the pattern is expected to continue. Let 1980 be the base year corresponding to X=0, with x=1,2,3....corresponding to later years. ABC stock was selling at $37.50 in 1985, and $45.00 in 1988. If y represents the price of ABC stock, find the equation y=mx+b that relates x and y, and predict the price in the year 2000.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! The value of stock ABC Corporation has been increasing by the same fixed dollar amount each year. the pattern is expected to continue.
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Let 1980 be the base year corresponding to X=0, with x=1,2,3....corresponding to later years. ABC stock was selling at $37.50 in 1985.
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That tells you the "y" intercept is 37.50
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ABC stock was selling at $37.50 in 1985, and $45.00 in 1988.
That gives you 2 points (0,37.50) and (3,45.00)
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So the slope is (45-37.5)/3 = 7.5/3 = 2.5
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If y represents the price of ABC stock, find the equation y=mx+b that relates x and y,
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Answer: y = 2.5x+37.5
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and predict the price in the year 2000.
f(5) = 2.5*5+37.5 = $50.00
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Cheers,
Stan H.
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