Math

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.
•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 years.
Write a professional memo that covers the following information: a.Explain to the client the main differences between simple interest versus compound interest.
b.Explain the results of the three different options by showing the client the step-by-step calculations.
c.Explain which investment option is better for your client and why.

asked by Amber
  1. At the end of 5 years:

    1. 6/4 = 1.5 for 20 periods
    1.015^20 = 1.35 gained 35% in 5 years

    2. 1.08^5 = 1.48 gained 48% in 5 years

    3. 14.5*5 = gained 72.5% in 5 years (best)

    Compounding is great but does not make up for this huge difference in interest rates.

    posted by Damon

Respond to this Question

First Name

Your Answer

Similar Questions

  1. math

    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
  2. math

    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
  3. math/ compounded

    Scenario: 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
  4. Investment interest

    Scenario: 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
  5. math

    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
  6. math

    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
  7. Finance

    a client comes to you for an investment advice on his 500,000 winnings from the lottery. he has been offered the following options. what would be the best option 6% compounded interest quarterly for 5 years or 8% compounded
  8. math ( Discrete Functions)

    lottery offers two options for the prize. (7) Option A: $1000 a week for life. Option B: $600 000 in one lump sum. If you choose Option B, you have the opportunity to place the winnings into an investment that also makes regular
  9. math

    A lottery offers two options for the prize. (7) Option A: $1000 a week for life. Option B: $600 000 in one lump sum. If you choose Option B, you have the opportunity to place the winnings into an investment that also makes regular
  10. Business Algebra

    I need to know the formula for these questions and just how to do them. If you could help please. As a financial planner a client comes to you for investment advice. After meeting with him and understanding his needs, you offer

More Similar Questions