Question
You have $20,000 in cash. You can deposit it today in a mutual fund earning 4.50% interest, compounded semi-annually. Or, you can wait, enjoy some
You have $20,000 in cash. You can deposit it today in a mutual fund earning 4.50% interest, compounded semi-annually. Or, you can wait, enjoy some of it, and invest $17,500 in your classmates start-up business in 2 years. Your classmate is promising you a return of 10.00% APR on your investment. Whichever investment you choose, you will need to cash in at the end of 10 years from today. Assume your classmate is trustworthy (so no worries you trust you will get your 10%) and both investments carry the same risk! Which one will you choose? (Please do not base your answer on how much fun you will have spending that $2,500 over 2 years! That $2,500 is gone. It should NOT factor into your answer.)
This is an "essay" - type question, but you do not need to type paragraphs. Please simply provide your calculator inputs and output(s). Even if you use the formulas instead of the calculator, please still write out the inputs/output(s) as follows: N = , I/Y = , PV = , PMT = , FV = ... Please identify your answer in some way, e.g. use bold-face type, red font, etc.
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