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Your friend Mon Tee, who is a broker is trying to convince you to invest in a bond at a 5% rate with an
Your friend Mon Tee, who is a broker is trying to convince you to invest in a bond at a 5% rate with an annual payment in ten years is P 50,000. Currently, banks are offering a 4% interest rate for ten years, compounded annually time deposit. You now have two options: invest in the bond or open a time deposit account. Which among the two investment opportunities will maximize your wealth? Using the formula of perpetuities to find the face value amount of the bond and compound interest to find the future value of the time deposit. Compare your solutions to determine your final decision. Your savings right now is the same amount as the face value of the bond.
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