Question

You have $12,000 to invest and want to keep your money invested for 8 years. You are considering the following investment options. Choose the investment option that will earn you the most money.

a.

3.99% compounded monthly


b.

4% compounded quarterly


c.

4.175% compounded annually


d.

4.2% simple interest

Answer 1

C ) 4.175 % compounded annually.

Explanation:

Answer 2

P = $12,000
a ) A = P * ( 1 + r ) ^n
r = 0.0399 : 12= 0.003325
n = 8 * 12 = 96
A = 12,000 * ( 1.003325) ^96 = $16,503.58
b ) r = 0.04 : 4 = 0.01
n = 4 * 8 = 32
A = 12,000 * ( 1.01 )^32 = $16,645.29
c ) r = 0.04175, n = 8
A = 12,000 * ( 1.04175 ) ^8 = $16,645.20
d ) r = 0.042
I = 8 * 12,000 * 0.042 = $4,032
A = P + I = 12,000 + 4,032 = $16,032
Answer:
The investment that will earn the most money is:
C ) 4.175 % compounded annually.