Madeline Jones has $6,000 and wants to invest it. Because she is only 20 years old, she is not worried about the length of the investment’s life. Her primary concern is the return she will earn on the investment. Her financial advisor has identified 4 investments that are ideal for her per her risk preferences. All the investments require an initial $6,000 payment.

a. Calculate the average annual rate of return on each of the 4 investments available to Madeline.

b. Which investment would you recommend to Madeline, given her goal of maximizing the annual return?

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Investment A B D Future cash inflow $15,000 8,000 13,000 10,500 Investment life (years) 15 4 12 6