You have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually; or you can wait, enjoy some of it, and invest $11,000 in your brothers business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose, you will need to cash in at the end of ten years. Assume your brother is trustworthy and both investments carry the same risk.

WHICH ONE WILL YOU CHOOSE??

Hint: Determine the future value of each option at the indicated interest rate and time period. Create a solution using time value of money equations and then use the FV financial function to solve: FV(rate,nper,pmt,pv,type). Make sure that all cells are properly formatted. The frequency of compounding periods per year is denoted by "m.

OPTION A Mutual Fund OPTION B: Brothers Business

Enter: N= Enter: N=

Enter: I= Enter: I=

Enter: PV= Enter: PV=

Enter: m= Enter: m=

Results (equation) FV10= Results: FV10=

Results (FV Function): FV10= Result: FV10=

Given the analysis above, the best alternative is to invest in the ????

The better alternative yields an additional ????