Question

You are a financial advisor. You have a client who is 25 years old and has

$10,000 they want to invest into a retirement account. After investing
this money, the client will not be adding any money to the account. The
money will just let it grow until the client reaches age 65. As you are
helping them decide the best investment for their money, you discover the
following options:


-

Account A pays 7% annual interest, compounded quarterly
-

Account B pays 6.8% annual interest com[ounded monthly
-

Account c pays 7.1% annual interest, compounded yearly.
-

Account D ay 6.9% annual interest, compounded daily.


Since it’s your job to determine the best account for your clients money,
you have to figure out the future value of her money.

You know that the following formula calculates compound interest

Answer 1

The first option is the best

Explanation:

1 (1+ 07/4)^4 = 7.186 % annual

2 ( 1+.068/12)^12 = 7.0159 % annual

3 7.1 %

4 (1 + .069/365)^365 = 7.143