1.Assume that when your great-grandmother was 25 years old, she received an engagement ring from her husband-to-be. He paid $50 for the ring containing a single, high quality diamond. When she passes away at ages of 90, the ring went to your grandmother, who kept it for 60 year and then gave it to your mother. After 30 years of keeping the ring in safe place, she gave it to you on your 24^th birthday. Today is your 48^th birthday and you have just discovered the ring in desk drawer, forgotten for all these years. If this high-Grade diamond has been now appraised as a collector's grade stone, which has appreciated in value at an average rate 4% per year, every year, since it was first purchased, you wonder what the ring might be valued at today.

Team Exercise

For each situation described, do the following using a five-person team.

(a)Determine the annual compound interest or inflation rate and discuss the differences in these rates from one situation to another.

(b)First, each member of the team should make estimate (a guess) of the beginning and ending amount of money involved foe each situation. Each team member should now calculate the two amounts for one selected situation. Between team members, discuss the accuracy of their first estimates compared to the actual amount calculated.