Question
Sam is willing to invest $30,000.00 for four years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C)
Sam is willing to invest $30,000.00 for four years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the four-year investment period, complete the following table and indicate whether Sam should invest in each of the investments.
Note: When calculating each investments future value, assume that all interest is compounded annually. The final value should be rounded to the nearest whole dollar.
Investment | Interest rate and Method | Expected future value | Make this investment? |
---|---|---|---|
A | 8% simple interest | ||
B | 3% compound interest | ||
C | 5% compound interest |
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