Question
You have two investment options. You can either invest $5,000 today once for ten years at an interest rate of 12%/year compounding on a yearly
You have two investment options. You can either invest $5,000 today once for ten years at an interest rate of 12%/year compounding on a yearly basis or you can invest the same amount of money for the same period of time in another project that has a yearly interest rate of 10% and compounds on a monthly basis. Assuming that both investments are completely risk free, which option will be better for you? (8 Points)
A Option 1
B Option 2
C Both are the same.
D The question does not include enough information to answer it.
E Depending on the risk aversion of the investor, it could be either Option 1 or Option 2.
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