Question
Suppose a company has a liability to pay $100,000 in two years. The company has two investment options to choose from: Option A: Invest $80,000
Suppose a company has a liability to pay $100,000 in two years. The company has two investment options to choose from:
Option A: Invest $80,000 today at 5% compounded annually for two years.
Option B: Invest $70,000 today at 6% compounded annually for two years.
Which investment option should the company choose in order to ensure it can meet its liability in two years? Show all calculations and explain your answer.
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Intermediate Microeconomics and Its Application
Authors: walter nicholson, christopher snyder
11th edition
9781111784300, 324599102, 1111784302, 978-0324599107
