Question

A coin had a value of $1.17 in 1995. Its value has been increasing at 9% per year. What is the value after 5 years?

Answer 1

P = P₀ (1 + r)ⁿ

  = 1.17(1 + 0.09)⁵

  = 1.17(1.09)⁵

  = 1.17(1.5386)

  = 1.80

Answer: $1.80

Note: If you don't know the formula, you could calculate each year.

Year 0: $1.17

Year 1: $1.17 + $1.17(0.09)  = $1.2753

Year 2: $1.28 + $1.28(0.09)  = $1.3948

Year 3: $1.39 + $1.39(0.09)  = $1.5155

Year 4: $1.51 + $1.51(0.09)  = $1.6464

Year 5: $1.65 + $1.65(0.09)  = $1.7982   which rounds up to $1.80