Craig invested $131,995 in the Dow-Jones Industrial Average Stocks when the average index was 2,896.  Ten years later, Craig's investment was worth $590,000.  What must the index have been ten...

Craig invested $131,995 in the Dow-Jones Industrial Average Stocks when the average index was 2,896.  Ten years later, Craig's investment was worth $590,000.  What must the index have been ten years later?

Round your final answer properly to the nearest whole number.

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justaguide's profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted on

Craig invested $131995 in the Dow-Jones Industrial Average stocks when the average index was at 2896. Ten years later his investment was worth $590000. Assume the change in the value of his investment is the same as the change in the Dow Jones Average.

The value of the index after 10 years was `(590000/131995)*2896` ` ~~` 12945

The required value of the Dow Jones average is 12945

tonys538's profile pic

tonys538 | Student, Undergraduate | (Level 1) Valedictorian

Posted on

It is given that Craig invested $131,995 in the Dow-Jones Industrial Average Stocks when the average index was 2,896.  After 10 years his investment was worth $590,000. 

The ratio of the initial investment to the final value, is equal to the ratio of the index value at the time of investment to the final index value.

This gives:

131995/590000 = 2896/X where X is the index value after 10 years.

X = (590000/131995)*2896

= 12944

After 10 years the index was at 12944.

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