Suppose you are given $1000 to invest. You have two options: a savings bond that offers 10% simple interest, or a savings account that offers 6% annual interest, compounded monthly. (a) If you were going to invest the money for 5 years, which is the better choice? How much interest does each option earn over 5 years? (b) If you were going to invest the money for 10 years, which is the better choice? How much interest does each option earn over 10 years? (c) Which option do you expect to be the better investment in the long run? Explain your thinking
Suppose you are given $1000 to invest. You have two options: a savings bond that offers 10% simple interest, or a savings account that offers 6% annual interest, compounded monthly. (a) If you were going to invest the money for 5 years, which is the better choice? How much interest does each option earn over 5 years? (b) If you were going to invest the money for 10 years, which is the better choice? How much interest does each option earn over 10 years? (c) Which option do you expect to be the better investment in the long run? Explain your thinking
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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Suppose you are given $1000 to invest. You have two options: a savings bond that offers 10% simple interest, or a savings account that offers 6% annual interest, compounded monthly.
(a) If you were going to invest the money for 5 years, which is the better choice? How much interest
does each option earn over 5 years?
(b) If you were going to invest the money for 10 years, which is the better choice? How much interest
does each option earn over 10 years?
(c) Which option do you expect to be the better investment in the long run? Explain your thinking
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