1. Questions

Math

Nancy wants to receive the most return on a $50,000 investment. She has two options. Option 1 gives annual interest at 5% compounded yearly. Option 2 gives annual interest at 3.5% compounded monthly.

Which option is better after 3 , and what is the difference in earned interest?

Option 2 earns more interest by $3,581.52.
Option 2 earns more interest by $2,396.13.

Option 1 earns more interest by $3,581.52.
Option 1 earns more interest by $2,396.13.

  1. 👍
  2. 👎
  3. 👁
John Cortez

  1. All you have to do is to compare the effective annual rate.
    5% per annum compounded annually = (1.05)^1 = 1.05
    3.5% per annum, compounded monthly = (1..00291666..)^12 = 1.035..
    clearly the first one gives you more on your return

    assuming you meant: Which option is better after 3 years, and what is the difference in earned interest?

    clearly option 1 gives you the better return for any period of same time.
    option 1 for 3 years = 50000(1.05)^3 = 57881.25
    option 2 for 3 years = 50000(1.0029166..)^36 = 55527.04
    difference = $2354.21

    1. 👍
    2. 👎
    👤
    Reiny

Respond to this Question

First Name

Your Response

Similar Questions

  1. Algebra 1- Help please

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for three different years: Number of years 1 2 3 Option 1 (amount in dollars) 1100 1210 1331 Option 2 (amount in dollars)

  2. Math

    1: An employer provides two payment options for employees. Option A: Receive $200 the first week. Receive an additional $50 for each of the following weeks. Option B: Receive $200 the first week. Receive an additional 10% for each

  3. Math

    A women has $500,000 invested in two rental properties. One yields an annual return of 14% on her investment, and the other returns 10% per year on her investment. Her total annual return from the two investments is $59,000. How

  4. Math

    When hired at a new job selling jewelry, you are given two pay options: Option A: Base salary of $16,000 a year, with a commission of 10% of your sales Option B: Base salary of $20,000 a year, with a commission of 3% of your sales

  1. Algebra

    A financier plans to invest up to $500,000 in two projects. Project A yields a return of 11% on the investment of x dollars, whereas Project B yields a return of 16% on the investment of y dollars. Because the investment in

  2. Math

    Nouchi has two investment options. Option A offers 9% annual interest with a $5000.00 principal and contributions of $500 at the beginning of each month. Option B offers 8% annual interest with a $10,000.00 principal and

  3. math

    A lottery offers two options for the prize. Option A: $1000 a week for life. Option B: $600 000 in one lump sum The current expected rate of return for large investment is 3%/a, compounded monthly. a.Which option would the winner

  4. algerbra

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for two different years: Number of years 1 2 3 Option 1 (amount in dollars) 1300 1600 1900 Option 2 (amount in dollars)

  1. math

    Alex is deciding between two investment options, Option A and Option B. He wants to choose the option that has the highest rate of growth over the first 3 years, because he plans to withdraw his investment at that time. The growth

  2. Finance

    Assume a $4,000 investment and the following cash flows for two alternatives. Year Investment X Investment Y 1 $1,000 $1,300 2 800 2,800 3 700 100 4 1,900 5 2,000 a. Under the payback method, which investment should be chosen?

  3. Business

    Assume that WilyMarketer is running an email campaign to acquire new customers. It is considering two options: Option A would use a high quality rental list of 100,000 email addresses. Direct costs under this option would be the

  4. MATH @Damon @ms. Sue

    Belinda wants to invest $1000. The table below shows the value of her investment under two different options for three different years: Number of years 1 2 3 Option 1 (amount in dollars) 1100 1210 1331 Option 2 (amount in dollars)

You can view more similar questions or ask a new question.