Annual $5,000 investments are to be made in either Fund A or Fund B. Fund A...
Annual $5,000 investments are to be made in either Fund A or Fund B. Fund A pays interest of 5% the 1st year, 5.25% the 2nd year, 6% the 3rd year; Fund B pays interest at the same rates, but in the reverse order.
True or False: Fund A will have a greater portfolio value after 3 years than Fund B.
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Answers: |
True |
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False |
Homework Answers
True or False: Fund A will have a greater portfolio value after 3 years than Fund B.
This statement is false
Fund A and Fund B both will have equal portfolio value after 3 years.
Portfolio value of Fund A after 3 years = $5000 * (1+5%) * (1+5.25%) * (1+ 6%) = $5,857.16
Portfolio value of Fund B after 3 years = $5000 * (1+6%) * (1+5.25%) * (1+ 5%) = $5,857.16
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