The Perth Mint (the government corporation that prints money and coin) had just produced a one kilogram gold coin imbedded with a rare-red-argyle diamond. The mint values the coin at $1,000,000. A one kilogram of gold has a market value of approximately $50,000 while the news media values the rare diamond at $950,000.

1. If the gold and the diamond both increase in value at 2% per annum, how much will the coin be worth in ten (10) years' time?

11. Assume gold increases in value at the risk free rate estimated to be 1.7% and diamonds have an average expected annual rate of price increase of 4.5%.

How much will the cold coin be worth in ten years' time?

111. Would you consider the gold coin a good investment? Why or why not?