A friend has $1,200 that he has saved from his part-time job. He will need his money, plus any interest earned on it, in six months and has asked for your help in deciding whether to put the money in a bank savings account at 4.10% interest or to lend it to Victor. Victor has promised to repay $1,236 after six months.Required: Calculate the interest earned on the savings account for six months. (Round your answer to 2 decimal places.) Calculate the annual rate of return if the money is lent to Victor. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Which alternative would you recommend?
A friend has $1,200 that he has saved from his part-time job. He will need his money, plus any interest earned on it, in six months and has asked for your help in deciding whether to put the money in a bank savings account at 4.10% interest or to lend it to Victor. Victor has promised to repay $1,236 after six months.Required: Calculate the interest earned on the savings account for six months. (Round your answer to 2 decimal places.) Calculate the annual rate of return if the money is lent to Victor. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Which alternative would you recommend?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A friend has $1,200 that he has saved from his part-time job. He will need his money, plus any interest earned on it, in six months and has asked for your help in deciding whether to put the money in a bank savings account at 4.10% interest or to lend it to Victor. Victor has promised to repay $1,236 after six months.
Required:
- Calculate the interest earned on the savings account for six months. (Round your answer to 2 decimal places.)
- Calculate the annual
rate of return if the money is lent to Victor. (Do not round intermediate calculations. Round your answer to 2 decimal places.) - Which alternative would you recommend?
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