Question

In: Finance

1a.) When I was considering what to do with my $10,000 lotterywinnings, my broker suggested...

1a.) When I was considering what to do with my $10,000 lottery winnings, my broker suggested that I invest half of it in gold, the value of which was growing by 8% per year, and the other half in certificates of deposit (CDs), which were yielding 6% per year, compounded every 6 months. Assuming that these rates are sustained, how much will my investment be worth in 14 years? (Round your answer to the nearest cent.)

1b.) Compute the simple interest INT for the specified length of time and the future value FV at the end of that time. Round all answers to the nearest cent. HINT [See Quick Examples 1–5.]

$28,700 is invested for 6 months at 6% per year.

Solutions

Expert Solution

Answer 1a)

5000 invested in Gold

5000 invested in CD

Future Value of Money invested in Gold

Present Value * (1+r)^n

r = 0.08

n = 14 years

= 5000 * (1+0.08)^14

= 14685.9618211

Future Value of CD

= Present Value * (1+r)^n

r =0.06 /2 = 0.03

n = 14 years * 2 = 28

= 5000 * (1+0.03)^28

= 11439.64

Answer 1b)

Simple Interest = Principal * interest Rate * time

= 28700 * 0.06 * 6 / 12

= 861

Future Value will be = Present Value + INterest

= 28700 + 861

= 29561

jeff jeffy answered 1 year ago

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