This problem is related to Problem 8. Jeff has $10,000 to invest for a period of 5
Question:
This problem is related to Problem 8. Jeff has $10,000 to invest for a period of 5 years. The following three alternatives are available at his bank:
Data from problem 8
Jeff has $10,000 to invest for a period of 5 years. The following account is available at his bank. The account pays 4 percent/year for year one, 6 percent/year for year two, 8 percent/year for years three and four, and 12 percent/year for year five. How much will be in the account at the end of the fifth year?
a. Account 1 pays 4 percent/year/year for year one, 6 percent/year/year for year two, 8 percent/year/year for years three and four, and 12 percent/year/year for year five.
b. Account 2 pays 6 percent/year compounded monthly for all 5 years.
c. Account 3 pays interest at the rate of 8 percent/year compounded semiannually for all 5 years.
Based on the available balance at the end of year 5, which alternative is Jeff’s best choice?
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