Question

Your brother-in-law has a coin collection. Today, two of his coins are each valued at $250. One coin is expected to increase in value by 6 percent annually while the other coin is expected to increase in value by 4.5 percent annually. If the estimated increases in value turn out to be accurate, what will be the difference in the value of the two coins 15 years from now?

a. $115.32
b. $205.94
c. $241.79
d. $252.64
e. $280.15

Answer 1

a. $115.32

Step-by-step explanation:

the first coin will be worth:

future value = present value x (1 + interest rate)ⁿ = $250 x 1.06¹⁵ = $599.14

the second coin will be worth:

future value = present value x (1 + interest rate)ⁿ = $250 x 1.045¹⁵ = $483.82

the difference in value = $599.14 - $483.82 = $115.32