Which one is a better scenario for your initial investment Rp 10,000,000.00 1) A 10-years investment with a constant 8% interest rate 2) A two-stages investment with the first stage you will receive 10% interest rate annually for six years and followed by 6% in the last four years.

Which one is a better scenario for your initial investment Rp 10,000,000.00 1) A 10-years investment with a constant 8% interest rate 2) A two-stages investment with the first stage you will receive 10% interest rate annually for six years and followed by 6% in the last four years.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Which one is a better scenario for your initial investment Rp 10,000,000.00
1) A 10-years investment with a constant 8% interest rate
2) A two-stages investment with the first stage you will receive 10% interest rate annually for six years and followed by 6% in the last four years.

Expert Solution

Step 1

The formula:

$F V = (1 + r)^{n} * P V$

Where,
PV = Initial Amount

FV = Future Value

n = Number of Years

r = Rate of Interest

Step by step

Solved in 6 steps

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