Question

Today, you have two coins each of which is valued at $100. One coin is expected to appreciate by 5.2 percent annually while the other coin should appreciate by 5.7 percent annually. What will be the difference in the value of the two coins 50 years from now?
A) $337.43
B) $318.04
C) $191.79
D) $128.32
E) $380.15

Answer 1

Answer:

The correct answer is option (A).

Explanation:

According to the scenario, the given data are as follows:

Both coin Value (p) = $100

One coin rate (r1) = 5.2%

second coin rate (r2) = 5.7%

Time (n) = 50 years

So, to calculate the difference in the value of the two coins 50 years, first we calculate future value of both coins:

For 1st coin

FV = P × (1 + r1) ^n

= $100 ×(1 + .052)^50

= $1261.21

For 2nd Coin

FV = P × (1 + r2) ^n

= $100 ×(1 + .057)^50

= $1598.64

So, the difference in the value = FV of 2nd coin - FV of 1st coin

= $1598.64 - $1261.21

= $337.43