Question

You are the financial manager of a large company and you must recommend the best investment to the board of directors.

1- (30 points) If the firm wants to invest 100,000 €, which of the following options is the most interesting one:

a) To invest in a bank account that offers an annual simple interest rate of 7%, for 10 years

b) To invest in a bank account that offers an annual compound interest rate of 6%, for 10 years

The bank pays interests once per year.

2- (40 points) If you decide the option of compound interest rate, what is the total amount after 10 years if the interests are paid: a. Semesterly

b. Quarterly c. Monthly d. Weekly

Compare the results and choose the best option for your firm.

(Can you please send the answer for question 2 only i had to put Q1 because they are related.)

thank you

Answer 1