Answer:
You are better off investing today in the mutual fund and earn 8.2 percent semiannually for 10 years.
Step-by-step explana
We will need to calculate the interest generated in both of these scenarios to determine which one is the best.
In scenario 1
Periods= 10 years * 2= 20 periods (since rate is biannual)
Principal= $12,000
Rate= 8.2%
Using the formula
Interest= Principal * Rate * Time
Interest= 12,000* 0.082 * 20
Interest= $19,680
In scenario 2
Principal= $11,000
Rate= 10%
Period= 8 years ( two years have already passed, so we calculate for 8 years since we want to see gain after 10 years)
Interest= 11,000* 0.10 * 8
Interest= $8,800
So imvesting $12,000 at interest rate of 8.2% biannually for 10 years is a better option.Answer:
You are better off investing today in the mutual fund and earn 8.2 percent semiannually for 10 years.
Explanation:
We will need to calculate the interest generated in both of these scenarios to determine which one is the best.
In scenario 1
Periods= 10 years * 2= 20 periods (since rate is biannual)
Principal= $12,000
Rate= 8.2%
Using the formula
Interest= Principal * Rate * Time
Interest= 12,000* 0.082 * 20
Interest= $19,680
In scenario 2
Principal= $11,000
Rate= 10%
Period= 8 years ( two years have already passed, so we calculate for 8 years since we want to see gain after 10 years)
Interest= 11,000* 0.10 * 8
Interest= $8,800
So imvesting $12,000 at interest rate of 8.2% biannually for 10 years is a better option.
