Question

Comparison of returns. WG Investors is looking at three different investment opportunities. Investment one is a​ five-year investment with a cost of ​$590 and a promised payout of ​$1,180 at maturity. Investment two is a​ seven-year investment with a cost of ​$590 and a promised payout of ​$1,652. Investment three is a​ ten-year investment with a cost of ​$590 and a promised payout of ​$2,891. WG Investors can take on only one of the three investments. Assuming that all three investment opportunities have the same level of​ risk, calculate the effective annual return for each​ investment, and select the best investment choice.

What is the effective annual return for investment​ one, a​ five-year investment with a cost of ​$590 and a promised payout of $1,180 at​ maturity? _______%(Round to two decimal​ places.)

What is the effective annual return for investment​ two, a​ seven-year investment with a cost of ​$590 and a promised payout of $ 1,652​?________% ​(Round to two decimal​ places.)

What is the effective annual return for investment​ three, a​ ten-year investment with a cost of ​$590 and a promised payout of $ 2,891​?________​% ​(Round to two decimal​ places.)

Which is the best investment​ choice? (Select the best​ response.)

Investment one

Investment two

Investment three

Answer 1