Your Uncle Bob has finally sold some of his Florida property, making a $50,000 profit that he
Question:
Your Uncle Bob has finally sold some of his Florida property, making a $50,000 profit that he wants to invest for 20 years when he retires. He has heard that you have some financial knowledge and has written you an email asking for some advice. He is considering two options.
Option 1: Invest in a neighborhood bank that pays a 10% annual interest rate compounded monthly.
Option 2: Investing with a broker that will pay a 10.5% annual interest rate compounded quarterly. However, the broker charges an annual maintenance fee of $1,000, the total payable when the account is closed.
Construct an email back to your uncle giving him advice on which option to pursue. Explain to him in words he can understand how you arrived at your conclusion. Also, give him some general advice about what he needs to be aware of if he might want to consider a different option or if he has other money to invest in the future.