You just purchased two coins at a price of 1030 each Because

You just purchased two coins at a price of $1,030 each. Because one of the coins is more collectible, you believe that its value will increase at a rate of 7.7 percent per year, while you believe the second coin will only increase at 7.1 percent per year. If you are correct, how much more will the first coin be worth in 20 years?

$1,063.55

$480.06

$349.66

$1,160.91

$130.91

Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence for the first coin:

A=$1030(1+7.7/100)^20

=$1030*4.40873572

=$4541(Approx)

Hence for the second coin:

A=$1030(1+7.1/100)^20

=$1030*3.942660816

=$4060.94(Approx)

Hence excess value=(4541-4060.94)

=$480.06(Approx).