Currently, Sally has $100,000 and her investment horizon is 8 years (i.e., all investments will be terminated at the end of year 8). She is considering one of the following investments products being offered by her private banker from OCBC Bank:

Greentech Fund: First year return is 4% per year, and this will increase by 1% each year for the next four years. Thereafter, returns will remain constant.

Net-zero Fund: Investment can only be made two years later (i.e., Her money is in the bank for the first 2 years). When the investment is made, the return on the first three years is 6% per year and 12% per year thereafter.

Interest of 3% per year (compounded monthly) can be earned if Sally deposits her money in an OCBC savings account.

Analyze which is a better investment product, showing all relevant workings.

Answer rating: 100% (QA)

SOLUTION To determine which investment product is better we need to calculate the future value of each investment option at the end of year 8 and comp... View the full answer