When I was considering what to do with my $10,000 lottery winnings, my broker suggested that...

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 2% per year, compounded every 6 months. Assuming that these rates are sustained, how much will my investment be worth in 13 years? (Round your answer to the nearest cent.)

Expert Solution

Formual to calculate Future value
Future value	Investment amount*(1+r)^(n)
where r is the interest rate and n is the number of years of investment

We would first calculate the value of $5000 invested in gold having interest rate of 8% per year
Future value of gold investment	5000*(1+0.08)^13
Future value of gold investment	5000*(1.08^13)
Future value of gold investment	$13,598.12

Future value of investment made in Certificate of deposits
The yield rate is compounded every 6 months and so we would use yield of 1% per six months with number of payments being 26 (13*2)
Future value of CD's	5000*(1+0.01)^26
Future value of CD's	5000*(1.01)^26
Future value of CD's	$6,476.28

Total investment would be worth	13598.12+6476.28
Total investment would be worth	$20,074.40

Therefore the investment would be worth $20,074.40 in 13 years

jeff jeffy answered 1 year ago

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