Unit 6 - Kaplan University | KU Campus

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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.
Page 1: Unit 6: Future Value, Present Value

Unit 6 - Kaplan University | KU Campus

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