Few items exist in the world that can appreciate in value like a rare diamond. The estimated value of a perfect 10 carat diamond has risen at an approximately exponential rate from about $750,000 in June 2005 to about $1,950,000 in June 2013. a) Find an equation in the form V(t) = V (1 + r)', where V is the value of the diamond in dollars in June 2005, r is the average annual growth rate, t is the time in years since June 2005, and V(t)is the value of the diamond in dollars at time t. b) What is the interpretation for the value of r? c) If this trend continues, what would be the value of the diamond in June 2020?

Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter6: Vector Spaces
Section6.7: Applications
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Few items exist in the world that can appreciate in value like a rare diamond. The estimated value
of a perfect 10 carat diamond has risen at an approximately exponential rate from about $750,000
in June 2005 to about $1,950,000 in June 2013.
a) Find an equation in the form V(t)
V (1 + r)', where V is the value of the diamond in
dollars in June 2005, r is the average annual growth rate, t is the time in years since June 2005,
and V (t)is the value of the diamond in dollars at time t.
b) What is the interpretation for the value of r?
c) If this trend continues, what would be the value of the diamond in June 2020?
evised May 2016
Page 2
Transcribed Image Text:Few items exist in the world that can appreciate in value like a rare diamond. The estimated value of a perfect 10 carat diamond has risen at an approximately exponential rate from about $750,000 in June 2005 to about $1,950,000 in June 2013. a) Find an equation in the form V(t) V (1 + r)', where V is the value of the diamond in dollars in June 2005, r is the average annual growth rate, t is the time in years since June 2005, and V (t)is the value of the diamond in dollars at time t. b) What is the interpretation for the value of r? c) If this trend continues, what would be the value of the diamond in June 2020? evised May 2016 Page 2
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