Question

Rate of return and investment choice Clare Jaccard has 59.000 to invest. Because she is only 25 years old, she is not concerned about the length of the investment's life. What she is sensitive to is the rate of return she will cam on the investment with the help of her financial advisor, Clare has holated for equally risky investments, each providing a single amount at the end of its life as shown in the flowing table. Al of the investments require an in a $9.000 payment a. Calculate to the nearest 0.01%, the rate of retum on each of the four investments available to Clare b. Which investment would you recommend to Clare given her goal of maximizing the rate of return? a. The annual rate of rotum,r, on investment is % (Round to two decimal place) The annual tate of retum. r. on Investment B is 0% (Round to two decimal places) The annual rate of return, r, on lovestment Ca % Pound to two decimal places) The annual cate of return on investment (% Round to two decimal place) b. Which of the investments should Clare Jaccard choose to reach her goal of maximizing the rate of rotum? (Select the best answer below) O A Investment OB. Investment B OC. Investment OD. Investment D

Answer 1

Out of the above 4 investments, investment C has given highest return of 12.66%, the calculations are based on yearly compounding, returns may vary based on continuous compounding.

investment We have to find out return from ase the formula we present value x (+ og? . Future Value rate of interest where r= NO of years Na Fouestment FUE $13800 PV = $9000 6 years, $9000 (1+r) Citogo $13800 - $13800 1+1 = $9000 - 1.0738 - 1 0.0738 cor) 7.38% Investment @ $32600 $9000 (+ry's 32600 89000 -) 15 179 0.0895 CM) 8.95% · Investment @ $14.500 $ 9000 (1+" 0.1266 Cos2 12.66% · Investment @ $23300 $ 9000 (1+r) . 0.0998 COS) 9.98% C has Of all these nuestmente , Investment return 8 it should be selected given highest