Congratulations! You have just won your local sweepstakes and you need to decide between two options for payout. You can either take the $50,000 in one lump sum or receive two installments at $25,000 each. The best interest rate available for the $50,000 is 4.75% per year compounded monthly, while for the two installments, the rate on the first $25,000 will be 5% per year and on the second installment (to be received one year later) will be 5% per year compounded quarterly. Which option will give you the most money after 10 years? Use the compound interest formula:
Congratulations! You have just won your local sweepstakes and you need to decide between two options for payout. You can either take the $50,000 in one lump sum or receive two installments at $25,000 each. The best interest rate available for the $50,000 is 4.75% per year compounded monthly, while for the two installments, the rate on the first $25,000 will be 5% per year and on the second installment (to be received one year later) will be 5% per year compounded quarterly. Which option will give you the most money after 10 years? Use the compound interest formula:
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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Congratulations! You have just won your local sweepstakes and you need to decide between two options for payout. You can either take the $50,000 in one lump sum or receive two installments at $25,000 each. The best interest rate available for the $50,000 is 4.75% per year compounded monthly, while for the two installments, the rate on the first $25,000 will be 5% per year and on the second installment (to be received one year later) will be 5% per year compounded quarterly. Which option will give you the most money after 10 years? Use the
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