Which is the better investment over a y year term? Calculate each one.
Investment that offers a rate of 2.25% per annum, compounded semi-anually.
Investment that offers a rate of 2.15% per annum, compounded quarterly.
Investment that offers a rate of 1.95% per annum, simple interest.
How do I calculate this?
Use the value of $1.00
a) amount = 1(1 + .0225/2)^2 = 1.022626..
b) amount = 1(1 + .0215/4)^4 = 1.02167
c) amount = 1 + 1(.0195)(1) = 1.0195
looks like the first
How much should I deposit at the end of each month into and investment account that pays 9% copounded mothly to have 4 million when I retire in 43 yrs. What is the interest that comes form the 4 million
22869
To determine which investment is better over a y-year term, we need to calculate the future value of each investment after y years. The future value will reflect the total amount that will be earned or obtained at the end of the investment term.
For the investment offering a rate of 2.25% per annum, compounded semi-annually, we can use the formula:
A = P * (1 + r/n)^(n*t)
Where:
A is the future value,
P is the principal amount (the initial investment),
r is the annual interest rate (in decimal form),
n is the number of compounding periods per year,
t is the number of years.
For this investment, r = 2.25% = 0.0225 (in decimal form), n = 2 (semi-annually), and t = y. You will need to substitute the appropriate values into the formula to calculate the future value.
For the investment offering a rate of 2.15% per annum, compounded quarterly, the formula remains the same, but in this case, r = 2.15% = 0.0215, n = 4 (quarterly), and t = y. Again, substitute the values and calculate the future value.
For the investment offering a rate of 1.95% per annum, simple interest, the formula is simpler:
A = P * (1 + r * t)
Where:
A is the future value,
P is the principal amount,
r is the annual interest rate (in decimal form),
t is the number of years.
For this investment, r = 1.95% = 0.0195, and t = y. Plug in the values and calculate the future value.
After calculating the future values of each investment, compare the results to determine which option offers the highest value. The investment with the highest future value would be considered the better investment over the y-year term.