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1 December, 09:20

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 7% per year, and the other half in certificates of deposit (CDs), which were yielding 3% 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.)

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  1. 1 December, 10:10
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    Answer: $20,478.78

    Explanation:

    In 14 years the investment will be,

    Gold

    10,000/2 = 5000

    Then use the compound interest formula

    5000 * (1+0.07) ^ 14 = $12,892.67

    For Certificates of Deposits.

    Use the Compound interest formula

    Rate and period are in years. Convert to semi annual basis.

    3% / 2 = 1.5%

    14 * 2 = 28 periods

    = 5000 (1 + 0.015) ^ 28

    = $7,586.11

    Add both

    =$12,892.67 + $7,586.11

    = $20,478.78
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