Question

You have $10,000 to invest and want to keep your money invested for 10 years. You are considering the following investment options. Choose the investment option that will earn you the most money. a. 2.89% compounded monthly b. 2.975% compounded quarterly c. 2.99% compounded annually d. 3.25% simple interest

Answer 1

B. 2.975 compounded quarterly

Answer 2

B. 2.975% compounded quarterly

Explanation:

We have been given

p = 10000

t = 10 years

Compound interest formula is :

`A=p(1+r/n)^(nt)`

Checking option A . 2.89% compounded monthly

So, n = 12

r = 0.0289

`A=10000(1+0.0289/12)^(120)`

=>
`A=10000(1.002408)^(120)`

A = $13345.70

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Checking option B. 2.975% compounded quarterly

So, n = 4

r =0.02975

`A=10000(1+0.02975/4)^(40)`

=>
`A=10000(1.0074375)^(40)`

A = $13450.10

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Checking option C. 2.99% compounded annually

So, n = 1

r = 0.0299

`A=10000(1+0.0299/1)^(10)`

`A=10000(1.0299)^(10)`

A = $13426.10

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Checking option D. 3.25% simple interest

Simple interest formula is :

`I=p* r* t`

r = 0.0325

t = 10

`I=10000*0.0325*10`

I = $3250

A =
`10000+3250=13250`

A = $13250

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Comparing all we can see that option B gives the most money. So, option B is correct.