Problema Solution
A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option would be the best for his investment.
Explain the results of the three different options by showing the client the step-by-step calculations.
Option 1: 6% compounded interest quarterly for 5 years.
Option 2: 8% compounded interest annually for 5 years.
Option 3: 14.5% simple interest for 10
Answer provided by our tutors
three different financial institutions and requests assistance to help understand which option would be the best for his investment.
Explain the results of the three different options by showing the client the step-by-step calculations.
Option 1: 6% compounded interest quarterly for 5 years.
Option 2: 8% compounded interest annually for 5 years.
Option 3: 14.5% simple interest for 10
Solution:
(1)
A=P*(1+6%/4)^(4*5)=1.347P
(2)
A=P*(1+8%)^5=1.469P
(3)
A=P*(1+14.5%*10)=2.45P
So the Option 3 is best