Question

You have $90,000 in cash. You can deposit it today in a mutual fund earning 7.5

percent semiannually; or you can wait, enjoy some of it, and invest $12,000 in your
brother's business after two years. Your brother is promising you a return of at least 12
percent on your investment. Whichever alternative you choose, you will need to cash
in at the end of 8 years. Assume your brother is trustworthy and that both investments
carry the same risk. Which one will you choose?

Answer 1

I will go to the Bahamas instead and think about later