Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two...

Question

Question

Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two...

Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two options: Maybank which offers 3.35% interest compounded annually. CIMB Bank which offers 3.3% interest compounded semi-annually. Which bank should Allan choose? Give your reason.

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Future value of an investment is found using the following equation

Future value of an investment = Present value x (1 + interest rate)

Future value of investment in Maybank RM 8000 x (1 + 0.0335)

Value of investment in Maybank = RM 8,268.00

2x1 Future value of investment in CIMB bank = RM 8000 x 0.033 1+ 2

Value of investment in CIMB bank = RM 8,266.18

Allan should choose Maybank because the value of investment in Maybank is higher than the value of investment in CIMB bank.

Add a comment

Answer 2

Similar Homework Help Questions

Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two...

Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two options: Maybank which offers 3.35% interest compounded annually. CIMB Bank which offers 3.3% interest compounded semi-annually. Which bank should Allan choose? Give your reason.
1. Allen Paige is planning to invest $10,000 in a bank certificate of deposit (CD) for...

1. Allen Paige is planning to invest $10,000 in a bank certificate of deposit (CD) for five years. The CD will pay interest of 9 percent compounded annually. What is the future value of Allen’s investment? How much would that investment be if Allen received simple interest only instead of compounded interest? 2. Mary Grace expects to need $50,000 for a down payment on a house in six years. How much would she have to invest today in an account...
21. You are about to deposit $139 into one of the following saving accounts to be left on deposit for 25 years, each ban...

21. You are about to deposit $139 into one of the following saving accounts to be left on deposit for 25 years, each bank offers an account with a different interest rate and compounding period. Assuming you want to maximize your wealth, how much money would be in the bank account that offers the best effective rate of return after 25 years? Bank A. 9.5 percent rate compounded semi annually Bank B. 9.4 percent rate compounded monthly Bank C. 9.3...

A friend wants to deposit $2000 into a savings account. She goes to two banks and...

A friend wants to deposit $2000 into a savings account. She goes to two banks and is offered competing interest rates for the account. Bank 1 has a 10% interest rate, and compounds once annually. Bank 2 has an 9% interest rate, but compounds monthly. Use the following annually compounded interest formula, A=P(1+r)^t where A is the accumulated amount, P is the principal amount deposited, r is the annual interest rate (as a decimal) and t is the number of...
A friend wants to deposit $2000 into a savings account. She goes to two banks and...

A friend wants to deposit $2000 into a savings account. She goes to two banks and is offered competing interest rates for the account. Bank 1 has a 10% interest rate, and compounds once annually. Bank 2 has an 9% interest rate, but compounds monthly. Use the following annually compounded interest formula, A=P(1+r)t where A is the accumulated amount, P is the principal amount deposited, r is the annual interest rate (as a decimal) and t is the number of...
You would like to deposit $1000 in a savings account. The bank gives you two options:...

You would like to deposit $1000 in a savings account. The bank gives you two options: Account A pays interest at a rate of 8% (annually compounded) each year. Account B pays a simple interest rate of 8% per year (but never compounds), and gives you a $50 bonus at the end of 5 years. What is the difference in the account balances in 5 years? (Your answer should be the solution to Balance of Account A minus Balance of...

6. A professional golfer goes through a lot of golf balls. She choose to invest her...

6. A professional golfer goes through a lot of golf balls. She choose to invest her money during the year and buy all her golf balls at the end of the year. In her current account she has invested $1,000 which earn 5.5% compounded annually. Inflation is expected to be 2% per year. What is the real interest rate for that account? 6. A professional golfer goes through a lot of golf balls. She choose to invest her money during...
Haruki has $2000 that he wishes to invest for the next two years. One year GICs...

Haruki has $2000 that he wishes to invest for the next two years. One year GICs are currently paying 8% while two year GICs are paying 12 % compounded annually. Economists are predicting that interest rates will rise by the end of he year. what is the minimum interest rate Haruki would need in year two, to make the one year GIC better than the two year GIC ?(Show your calculations)
You deposit $1,000 at the end of the year (k = 0) into an account that...

You deposit $1,000 at the end of the year (k = 0) into an account that pays interest at a rate of 6% compounded annually. Two years after your deposit, the savings account interest rate changes to 12% nominal interest compounded monthly. Five years after your deposit, the savings account again changes its interest rate, this time the interest rate becomes 8% nominal interest compounded quarterly. Eight years after your deposit, the saving account changes its rate once more to...

Your mother is trying to choose one of the following bank CDs to deposit $10,000. Which...

Your mother is trying to choose one of the following bank CDs to deposit $10,000. Which one will have the highest future value if she plans to invest for three years? (Assume a 365day year and use 4 decimal places.) Group of answer choices 3.44%, compounded daily 3.45%, compounded weekly 3.46%, compounded monthly 3.48%, compounded quarterly 3.50%, compounded annually.

Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two...

Homework Answers

Add Answer to:
Mastura wishes to invest RM8,000 in a fixed deposit account for one year. She has two...

Post as a guest

Earn Coins