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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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.
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