Unit 6 - Kaplan University | KU Campus

Unit 6: Future Value, Present Value - Instructor Graded Project Similar
Problem
Video Worksheet: Should I Invest in Gold?
Instead of referencing a video, this example will have all the numbers provided in it. Please
note that for the graded problem some numbers will be given in the video!
1. If you were to place $25,000 in the bank at 2.4% interest, how much would you have in
the bank after one year if the interest were compounded monthly?
FV = P(1 + R)^N, where FV is the future value, P is the principal, R is the period interest
rate, and N is the number of periods.
R = 2.4%/12 = 0.002 and N = 1(12) = 12.
FV = 25,000(1 + 0.002)^12 = 25,000(1.002)^12 = $25,606.64
2. If you were to buy a gold certificate worth $25,000 and it appreciated by 15% per year,
how much would the gold certificate be worth at the end of one year?
FV = P(1 + R), where FV is the future value, P is the present value, and R is the annual
appreciation rate.
FV = 25,000(1 + 0.15) = 25,000(1.15) = $28,750.00
3. Which investment carries a higher risk of losing money? What factors could cause the
value of gold to depreciate instead of appreciate?
The student should conduct research for answers to these questions.
4. If a Canadian Gold Maple Leaf coin costs $1,650 today and appreciates in value by 13% in
one year, what will it be worth one year from today?
FV = P(1 + R), where FV is the future value, P is the present value, and R is the annual
appreciation rate.
FV = 1,650(1 + 0.13) = 1,650(1.13) = $1,864.50

5. How much would the same coin be worth after 5 years if the appreciation rate averages
13%? Assume that the appreciation would be compounded annually and use the Future
Value Formula for Simple Interest.
FV = P(1 + R)^N, where FV is the future value, P is the present value, R is the annual
appreciation rate, and N is the number of years.
FV = 1,650(1 + 0.13)^5 = 1,650(1.13)^5 = $3,040.02
6. What would a gold Krugerrand coin be worth in one year if its current value is $1,500 and
it appreciates at 11% over the year?
FV = P(1 + R), where FV is the future value, P is the present value, and R is the annual
appreciation rate.
FV = 1,500(1 + 0.11) = 1,500(1.11) = $1,665.00
7. What would the value of the same gold Krugerrand coin be after 10 years if the average
annual appreciation rate is 11%?
FV = P(1 + R)^N, where FV is the future value, P is the present value, R is the annual
appreciation rate, and N is the number of years.
FV = 1,500(1 + 0.11)^10 = 1,500(1.11)^10 = $4,259.13.
8. How much has an American Gold Eagle coin appreciated based upon its original value of
$10 and its current value of $1,600?
FV = P(1 + R), where FV is the current value, P is the original value, and R is the amount of
appreciation.
1,600 = 10(1 + R)
1,600/10 = 1 + R
160 = 1 + R
R = 159 = 159 x 100% = 15,900%
9. If a 1922 gold certificate is currently worth $84,000 and it increases at a rate of 17½%,
how much will it be worth next year?
FV = P(1 + R), where FV is the future value, P is the present value, and R is the annual
appreciation rate.

FV = 84,000(1 + 0.175) = 84,000(1.175) = $98,700.00
10. Sharon collects gold coins. She had several gold coins that she originally wanted $12,000
for. She agreed to sell them for $10,000. Why would she agree to lower her price by $2,000?
The student should consider the possible reasons Sharon would lower her price.
11. If the price paid for the gold coins increases in value at an overall rate of 15% next year,
what will this investment be worth next year?
FV = P(1 + R), where FV is the future value, P is the present value, and R is the annual
appreciation rate.
FV = 10,000(1 + 0.15) = 10,000(1.15) = $11,500.00
12. Do you think that investing in gold is a good investment? Why or why not?
The student should research the pros and cons of investing in gold.