You have two investments to choose from. Investment A pays an interest rate of 5% for 2 years and Investment B pays an interest rate of 2% for 5 years. Given that you have $100 to invest and can only choose from investment A or B, Which one should you choose?

You have two investments to choose from. Investment A pays an interest rate of 5% for 2 years and Investment B pays an interest rate of 2% for 5 years. Given that you have $100 to invest and can only choose from investment A or B, Which one should you choose?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.2: Investing: Taking Risks With Your Savings

Problem 4R

See similar textbooks

Related questions

Q: Suppose the yen is expected to appreciate by 4% against the pound in one year. If the nominal…

A: Currency appreciation is an increase in the value of one currency in relation to another currency.…

Q: Demand and Supply of Labor by Firm A Output MPL MRPL Scenario 1 Scenario 2 No. of Workers MR=20 W =…

A: Perfectly competitive markets are referred to the markets where all the firm sells an identical…

Q: An economy produces only three types of goods: apples, oranges and bananas, production units and…

A: Nominal GDP is the value of all final goods and services produces in any economy in a given year. So…

Q: If a country that fixes its exchange rate increases its money supply, then its currency will become…

A: In the fixed exchange rate system, any change in money supply will lead to affect the value of…

Q: Explain the law of diminidhing returns whith a relevant example

Q: If an investment of BD10,450 will be given in an interest rate of 15% for the period from (January1…

A: Given Principal amount P = BD10,450 Interest rate =15% Investment is made on 1 January 2024 The…

Q: Solve and analyze the following problems. Make sure all steps are properly justified. Correctly uses…

A: The equilibrium is established where the demand and supply are equal. Pd =PS.

Q: Let CPI, represent CPI in period t and let CPI₁+1 represent the CPI in period t + 1. CPI inflation…

A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…

Q: of Naked Economics, Charles Wheelan explains alternative exchange rates systems. To which of the…

A: A fixed exchange rate can be defined as a system of exchange rate that ties the country's official…

Q: What incentives arise for a central bank to fall into the time-inconsistency trap of pursuing overly…

A: The central bank is the governing body that oversees, operates, regulates, and administers the…

Q: B. The figure below shows the market of physician visit. Current market price for each physician…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: A. The RBA (Reserve Bank of Australia) is concerned about the trend since the early 2000s of a 75%…

A: Introduction Question related to the topic study of economics among students.

Q: Suppose a decrease in price from $10a to $5 causes an increase in Q D from 1003 to 120. Calculate…

A: Given When the price is decreased from $10α to $5 then the quantity demanded increases from 100β to…

Q: In computing the consumer price index (CPI), a base year is chosen. Which of the following…

A: The price index is described because the relative prices of products and services in a specific…

Q: Value of college education $200,000 $100,000 (a) Group I C1 (y) = $40,000 y 1 2 3 Optimal choice of…

A: Market equilibrium Market equilibrium is a point at which the demand and supply in the market meet.…

Q: Consider two countries, A and B. Assume that both countries have identical physical endowments of…

A: In the instance at hand, Country A has a regime-driven economy, in which the government limits the…

Q: Using the money market, which process best explains what happens to the interest rate when income…

A: Money market determines the equilibrium interest rate where quantity of real money balances equals…

Q: Now assume the game is simplified into two strategies for each player. Paul plays T or B, and Stella…

A: d) Pure strategy equilibrium To find out the pure strategy equilibrium, we use the best responses…

Q: According to the Solow model, an increase to the savings rate will O increase income per worker in…

A: Solow model is an exogeneous growth model which states that the growth rate of the economy is…

Q: Which of the following is NOT true about poverty? O 1. According to the UN, the line of poverty is…

A: Statement 1 is correct- It is the universal yardstick by which world poverty is measured. This line…

Q: Question 2. Suppose that the price elasticity of demand for an ice cream cone is -1.9. If the local…

A: Gradually in the simple words we can say that the Price elasticity of demand is generally known to…

Q: 3) a) Discuss the phrase there ain't no such thing as a free lunch (TANSTAAFL) in the context of…

A: When choosing between two possibilities, a person, an investor, or a firm may suffer opportunity…

Q: (A). Figure 1: equilibrium exchange rate is at point 1 where expected dollar returns on dollar and…

A: Exchange rate The exchange rate is the rate at which two nations' currents are changed in the…

Q: using economic concepts , discuss the impact of the following events on the equilibriumprice level…

A: Contractionary monetary policy is used by a central bank in order to slow down the economy, with the…

Q: Discuss Okun's law and Philip's Curve

A: Okun law in a economics states that there exist a statistical relationship between unemployment rate…

Q: Consider the null and alternative hypotheses He: -5.6 vs. H₁ :>-5.6, where the sample mean is 2-4.9…

A: Null Hypothesis refers to the proposition that the set of observed variables of the observed…

Q: 6. Using the Solow Model, determine graphically, the steady state for capital and output when there…

A: In the Solow model, equilibrium occurs where the savings curve intersects the depreciation +…

Q: Part 1: There is much discussion in the press about several states moving to legalizing marijuana,…

A: The curve that depicts various quantities of goods and services being demanded by individuals at…

Q: In a two-period model, suppose that a consumer's utility function is: U(C₁, C₂) = log(c₁) + log(c₂)…

A: Given information U(C1,C2)=log C1+LogC2 It is intertemporal model of 2 period C1= consumption in…

Q: [CLO-6] Which investment project is guaranteed to be accepted for an evaluation useful life of 6…

A: MARR is the the minimum acceptable rate of return. Below MARR firm will not accept any investment.…

Q: A6 “Commodity-rich Australia is one of the very few countries to receive an economic growth upgrade…

A: Natural Rate of Unemployment is the rate of unemployment when the GDP is at its potential level and…

Q: equation for the tax-adjusted user cost of capital is (r+d)PK 1-t (1-t)i-ne. =. (r-d)pk. -. (r+d)pk.

A: Given that, real interest rate,r = 0.16 depreciation rate,d = 0.06 Tax adjusted user cost, = 14.72…

Q: A firm encountering ● economies of scale over some range of output will have a: rising long-run…

A: Economies of scale are cost benefits harvested by organizations when creation becomes productive.…

Q: Lilly deposits $800 every month into an account that earns 5% annual interest where interest is…

A: We can calculate the amount at the end of 4 years semi-annually with the help of the following…

Q: Problem 3. The demand function for a particular product is √50-p². Find out if the demand is elastic…

A: The demand function is: Q = a - bP The formula for elasticity is given by: e = dQdP x PQ

Q: Two workers, A and B, produce the same product on identical machines. A receives P25.00 per hour and…

A: The hourly wage is how much cash paid to a representative for each hour of work performed.

Q: Consider the data in the following table, which represents the total productio country Byzantium, a…

A: Nominal GDP - This is the GDP calculated with the price and quantity at current price without…

Q: What is meant by dominant strategy?

A: When analysing a game, there are different ways to get the optimal outcome according to the given…

Q: An American airplane manufacturer sells a new airplane to a Japanese airline. From the perspective…

A: Manufacturing Manufacturing is the process of transformation of raw materials or parts into…

Q: A monopolist is determining the optimal output Q* to produce. Demand Function: P=12-2Q Average…

A: Given Demand function faced by monopolist: P= 12-2Q ... (1) Average cost function:…

Q: Consider the data for a known country for the consumer price index (CPI), by components:(base year…

A: a) The value of the CPI index in December 2018 is 107.76. The value of the CPI index in the Base…

Q: Problem Solving 1. Suppose the Central Bank reduces the money supply by 5 percent. Assume the…

A: Aggregate Demand is the prevailing demand for all the services and goods in the country’s economy…

Q: What is an "open access resource"? Why do open access resources often exhibit what is known as the…

A: open access asset:- Open access asset is a decent or administration over which no property…

Q: 17- Assume that 12t = 0.15% and that 11t = 0. If the one-year interest rate is 5% and the two-year…

A: A lender will charge a borrower an interest rate in addition to the principle amount for the use of…

Q: Consider the following data for a particular economy: GDPmp = 950 Private consumption = 750 Gross…

A: According to the question, it is given that : GDP at market price = 950 Private consumption = 750…

Q: TC = 116 +27Q+4Q² What is the average fixed cost when 5 units are produced? Enter as a value, ROUND…

A: Answer: Given, Total cost function: TC=116+27Q+4Q2 Fixed cost: fixed cost remains fixed in the short…

Q: Explain what a constant labor share of national income implies about the relationship between the…

A: Labor productivity is an idea used to gauge the laborer's effectiveness. It is determined as the…

Q: Is the following statement true or false? Given is the graph below of the oil market. Without the…

A: Here, the given graph shows the before tax and after tax outcome of the market.

Q: ms produce and sell differentiated products that are substitutes for each other. Their demand curves…

Q: Rod N. Reel owns a dealership that sells fishing boats in an open price-searcher market. To develop…

A: Introduction Data of weekly sold boats and revenue of boats of Rod has given. Table: Price ($)…

Question

You have two investments to choose from.
Investment A pays an interest rate of 5% for 2 years and
Investment B pays an interest rate of 2% for 5 years.
Given that you have $100 to invest and can only
choose from investment A or B, Which one should you
choose?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Soon possible
How can APT be used in investment decision?
True/ False The value of an investment can be determined by the rate or return.
The minimum attractive rate of return (MARR), is considered as the lowest interest rate that will induce companies or individuals to invest their money. Select one: O True O False
Choose the letter/s of the correct answer/s.In Engineering Economics, which among these is/are true about a discount?A. It is the difference between the future and present worth values.B. Its discount rate will never be equal to the interest rate.C. It is a year-end payment paid at the beginning.D. It is the interest paid for every year-end payment.
N Owns a Disability Income policy that will cover him to age 65, allhough the insurance company has the right to change the premium rate for the overall risk class to which N is assigned. Which of he following types of renewability best describes this situation? A.Noncancellable B.Cancellable C.Guaranteed Renewable D.Optionally Renewable
In Engineering Economics, which among these is/are true about a discount?A. It is the difference between the future and present worth values.B. Its discount rate will never be equal to the interest rate.C. It is a year-end payment paid at the beginning.D. It is the interest paid for every year-end payment.
What is MARR and how do you choose it?
Solve D and E only in typed answer
Parts D, E and F.
My A S Test IN Sign e-ha D. IXLI My S EdP S Day S Day e-ha G is 14 M Worl G think G wha vbschools.schoology.com/common-assessment-delivery/start/5966433426?action=onresume&submissionId=872493446 ood Bookmarks S Schoology E Module 5: Credit an... End Of Year Assessment POSSIBLE POIN Sofia receives a text message from her bank. All of the following indicate that the text may actually be a scam EXCEPT... O The text message asks her to call the number that is on the back of her debit card O The text message has a few spelling errors in the body of the text O The text message includes a link that starts with "http" O The text message indicates that she will lose a significant amount of money if she does not respond within 1 hour 4 esc # $ & 7 a 2 W S 3 e d 4 f % 5 t 6 g h h 30 31 32 33 34 35 36 37 38 * ( ) u 8 9 m 0
Please solve with step and no reject thank u