Question

You have $50000 to invest. Investment product A can offer you an annual compound interest at 2.5%, while investment product B can offer you an annual simple interest at 5%. If you choose investment product B, how much additional or less money you will receive after 10 years of investment? Use positive value if investment product B returns more money and negative value if investment product A returns more money. You can round to the nearest integer.

Answer 1

-1.504

Step-by-step explanation:

the key here is to see that there are providing two types of interest rates, for Fund A we have an anually compunded, and for Fund B we have simple inerest, so let´s first calculate the accumulated value after 10 years:

`Fund A=50.000*(1+0.025)^(10)`

`Fund A=64.004,23`

and by the other side for Fund B:

`Fund B=50.000*(1+0.025(10))`

`Fund B=62.500`

so, as it is requested the answer will be 62.500-64.004,23 it equals to -1.504,23 rounded -1.504