Question 2. (12 pts) You have extra $5,000 to invest. You do not need the money...

 

Transcribed Image Text:

Question 2. (12 pts) You have extra $5,000 to invest. You do not need the money now but will need it after 3 years, so you plan to cash your investment at the end of 3 year. Usually your investments earn 7% annual interest compounded annually and you'd like to consider it as your minimum acceptable rate of return. You are considering several investment opportunities: Option 1. Depositing your money on the high interest savings account that earns 0.58% interest each month. Option 2. Buying and holding a stock that grows 10% per year. Option 3. Making a personal loan of $5000 to a friend and receiving $400 per year. Select the best option and explain why. Question 2. (12 pts) You have extra $5,000 to invest. You do not need the money now but will need it after 3 years, so you plan to cash your investment at the end of 3 year. Usually your investments earn 7% annual interest compounded annually and you'd like to consider it as your minimum acceptable rate of return. You are considering several investment opportunities: Option 1. Depositing your money on the high interest savings account that earns 0.58% interest each month. Option 2. Buying and holding a stock that grows 10% per year. Option 3. Making a personal loan of $5000 to a friend and receiving $400 per year. Select the best option and explain why.

Answer rating: 100% (QA)

Based on the information provided Option 2 buying and holding a stock that grows 10 per year is like... View the full answer