[Related to Solved Problem

3.1A]

Suppose that you are considering investing $1 ,500 in one of the following bank CDs.

CD 1, which will pay an interest rate of 9% per year for three years

CD 2, which will pay an interest rate of 9% the first year, 9% the second year, and 7% the third year

The future value of CD 1 is ?

and the future value of CD 2 is ?

(Round your responses to the nearest cent.)

Given the future values you calculated, which CD should be chosen?

A. CD 1 should be chosen.?

B. CD 2 should be chosen.?

Now suppose for CD 2 the interest rates stay the same but the order in which they are paid changes such that CD 2 pays an interest rate of 7%

the first year, 9% the second year, and 9% the third year. What is the future value of new CD 2?

The future value of new CD 2 is ?

(Round your responses to the nearest cent.)

We also have a third CD in which you might investlong dashone that pays an interest rate of 3%the first two years and an interest rate of 12% the third year.

How does the future value of this investment compare to the other two?

The future value of CD 3 is greater or less

than the future value of CD 1 and less or greater than the future value of CD 2.

Which is the best investment?

The best investment is CD

1

2

or

3