Question

Today Leo Burke purchased an investment grade gold coin for $150,000. He expects it to increase in value at a rate of 7% compounded annually for the next 5 years. How much will the coin be worth at the end of the fifth year?

Answer 1

The coin is worth $150,000 today. If compounded annually, the coin will be worth: [150000(1.07^5)], which it makes it equal to $210,382.76. Compounding the investment grade coin allows its value to compound upon the interest being received and hence carry a higher worth at the end of 5 years time period.