Quantitative Reasoning Assignment #3

BUS-105 NS Fewins Unit 3

Adam Jones, age 55, received $30,000 from his great uncle's will and is trying to decide how to invest it to maximize his return on his investment for his future retirement at age 65. He finds 3 options at a local bank to compare.

1. Invest in a simple interest savings account at 8% interest. (4 points)

2. Invest in a savings account that generates quarterly compound interest of 4%. (4 points)

3. Invest in a savings account that generates daily compounded interest at 6%. (4 points)

Option 1)

Amount at Retirement = Investment + Interest

Amount at Retirement = 30000 + (30000*8%*10)

Amount at Retirement = 54000

Option 2)

Amount at Retirement = Investment*(1+r)^n

• r = 4%/4 = 1%
• n = 10*4 =40

Amount at Retirement = 30000*(1+1%)^40

Amount at Retirement = 44665.91

Option 3)

Amount at Retirement = Investment*(1+r)^n

• r = 6%/365
• n = 10*365 = 3650

Amount at Retirement = 30000*(1+ 6%/365)^3650

Amount at Retirement = 54660.87

Investment in Option 3 would maximize his return on his investment for his future retirement as his Amount at Retirement is highest among all option

Show calculations and decide which investment to choose.

4. Contact a local bank or go online and find out what the actual current rates are on savings accounts and CD's for investing purposes. Include the link or which bank you contacted. Are the above options realistic? What are some other options for Adam to consider outside of banking CD's and savings accounts? Identify at least three other viable options for Adam to consider. (8 points)

Your assignment needs to be word-processed but you can scan and submit your clearly hand written calculations.