You have $100,000 to invest over the next two years.

a.Compute the future value of your investment under the following options:

i.Invest in a bond that provides a 3% annual rate of return, compounded quarterly.

ii.Invest in a bond that provides a 3% annual rate of return, compounded continuously.

iii.Invest in a mutual fund that is expected to provide a 4% annual rate of return.

b.Which of the three options above provides the largest rate of return over two years? What is the present value of that investment? (Assume a discount rate of 3.5%)

Answer rating: 100% (QA)

Lets calculate the future value FV of the investment under each option a i For the bond compounded q... View the full answer