Charlie has $12,000 to invest for a period of 5 years. The following three alternatives are available to him: Account 1 pays 4.00% for year 1, 5.00% for year 2, 8.00% for year 3, 9.00% for year 4, and 12.00% for year 5, all with annual compounding. • Account 2 pays 12.00% for year 1, 9.00% for year 2, 8.00% for year 3,5.00% for year 4, and 4.00% for year 5, all with annual compounding. • Account 3 pays interest at the rate of 7.56183 % per year for all 5 years. Based on the available balance at the end of year 5, which alternative is Charlie's best choice? Year 5 Balance, Alternative 1: $ Year 5 Balance, Alternative 2: $ Year 5 Balance, Alternative 3: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is £5.

Charlie has $12,000 to invest for a period of 5 years. The following three alternatives are available to him: Account 1 pays 4.00% for year 1, 5.00% for year 2, 8.00% for year 3, 9.00% for year 4, and 12.00% for year 5, all with annual compounding. • Account 2 pays 12.00% for year 1, 9.00% for year 2, 8.00% for year 3,5.00% for year 4, and 4.00% for year 5, all with annual compounding. • Account 3 pays interest at the rate of 7.56183 % per year for all 5 years. Based on the available balance at the end of year 5, which alternative is Charlie's best choice? Year 5 Balance, Alternative 1: $ Year 5 Balance, Alternative 2: $ Year 5 Balance, Alternative 3: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is £5.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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### Investment Options Analysis for Charlie

Charlie has $12,000 to invest for a period of 5 years. The following three alternatives are available to him:

1. **Account 1** pays 4.00% for year 1, 5.00% for year 2, 8.00% for year 3, 9.00% for year 4, and 12.00% for year 5, all with annual compounding.
2. **Account 2** pays 12.00% for year 1, 9.00% for year 2, 8.00% for year 3, 5.00% for year 4, and 4.00% for year 5, all with annual compounding.
3. **Account 3** pays interest at the rate of 7.56183% per year for all 5 years.

**Based on the available balance at the end of year 5, which alternative is Charlie's best choice?**

- **Year 5 Balance, Alternative 1:** $____________
- **Year 5 Balance, Alternative 2:** $____________
- **Year 5 Balance, Alternative 3:** $____________

Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

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This detailed breakdown allows for an educational exploration of the compound interest principles and enables learners to evaluate the best investment option based on future expected balances. The problem requires applying compound interest formulas and comparing the results of three different investment strategy alternatives.

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