Question
Assume that you have $6000 to invest for 5 years. You could purchase a 5-year CD with a guaranteed interest rate of 2.5% compounded monthly.
Assume that you have $6000 to invest for 5 years. You could purchase a 5-year CD with a guaranteed interest rate of 2.5% compounded monthly. On the other hand, if you are willing to face the risk of actually losing your money, you could invest it in the stock market which has an historical return rate of about 6.5% per year. Think of this as investing your money in a non-guaranteed account that pays 6.5% APR compounded annually. With the specific interest rates quoted, how much more interest could you potentially earn by putting your money in the stock market for 5 years instead of in the CD? Round your answer to the nearest whole dollar.
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