Question

A person wants to invest $24,000 for 2 years and is considering two different investments. The first investment, a money market fund, pays a guaranteed 6.6% interest compounded daily. The second investment, a treasury note, pays 6.8% annual interest. Which investment pays the most interest over the 2-year period? Choose the correct answer below. in interest. in interest, and the treasury note pays s in interest, and the treasury note pays s O A. The market fund is the botter investment, since the market fund produces s OB. The treasury note is the better investment, since the market fund produces s OC. Both the market fund and the treasury note produce the same interest with $ (Round to the nearest cent as needed.) in interest.

Answer 1

For Money Market Fund;

FV = Investment * (1 + r)ⁿ

= $24,000 * [1 + (0.066/365)]^(2*365)

= $24,000 * 1.1411 = $27,386.27

Interest = FV - Investment = $27,386.27 - $24,000 = $3,386.27

For Treasury Note;

FV = Investment * (1 + r)ⁿ

= $24,000 * [1 + 0.068]²

= $24,000 * 1.1406 = $27,374.98

Interest = FV - Investment = $27,374.98 - $24,000 = $3,374.98

Option "A" is correct. Since, Interest earned on money market fund is more than the interest earned on treasury note.