A friend has $5,000 that has been saved from her part-time job. She will need her 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 4.5% interest or to lend it to Simone. Simone has promised to repay $5,250 after six months. Required: Calculate the interest earned on the savings account for six months. Calculate the rate of return if the money is lent to Simone. Round your percent- age answer to two decimal places. Which alternative would you recommend? Explain your answer.

A friend has $5,000 that has been saved from her part-time job. She will need her 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 4.5% interest or to lend it to Simone. Simone has promised to repay $5,250 after six months. Required: Calculate the interest earned on the savings account for six months. Calculate the rate of return if the money is lent to Simone. Round your percent- age answer to two decimal places. Which alternative would you recommend? Explain your answer.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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