MGNT 6005
Chptr 7 Homework Problems and Answers
P7.1
Constant Growth Model
.
The U.S. Bureau of the Census publishes employment statistics
and demand forecasts for various occupations.
Employment
(1,000)
Occupation
1998
2008
Bill collectors
311
420
Computer engineers
299
622
Physicians assistants
66
98
Respiratory therapists
86
123
Systems analysts
617
1,194
A.
Using a spreadsheet or hand-held calculator, calculate the ten-year growth
rate forecast using the constant growth model with annual compounding, and
the constant growth model with continuous compounding for each occupation.
B.
Compare your answers and discuss any differences.
P7.1
SOLUTION
A.
Using the assumption of annual compounding,
E
t
= E
0
(1 + g)
t
420
= 311(1 + g)
10
1.35
= (1 + g)
10
ln(1.35)
= 10
Η
ln(1 + g)
0.300/10
= ln(1 + g)
e
0.030
= 1 + g
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