Problem

Investment You have $1000 to invest, and you have two options: Option A: 4.725% com...

Investment You have $1000 to invest, and you have two options:

Option A: 4.725% compounded semiannually

Option B: 4.675% compounded continuously.

a. Calculate the annual percentage yield for each option. Which is the better option?

b. Calculate the future value of each investment after 2 years and after 5 years. Does your choice of option depend on the number of years you leave the money invested?

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Solutions For Problems in Chapter 1.6