Which of the following investments will have the highest future value at the end

Question

Which of the following investments will have the highest future value at the end of 5 years?

Assume that the effective annual rate for all investments is the same and greater than zero.

Answer
a. A pays $50 at the beginning of every 6-month period for the next 5 years (a total of 10 payments).

b. C pays $100 at the end of every year for the next 5 years (a total of 5 payments).

c. D pays $100 at the beginning of every year for the next 5 years (a total of 5 payments).

d. B pays $500 at the end of 5 years (a total of one payment).

Explanation / Answer

Which of the following investments will have the highest future value at the end of 5 years?

Assume that the effective annual rate for all investments is the same and greater than zero.

Answer
a. A pays $50 at the beginning of every 6-month period for the next 5 years (a total of 10 payments).

b. C pays $100 at the end of every year for the next 5 years (a total of 5 payments).

c. D pays $100 at the beginning of every year for the next 5 years (a total of 5 payments).

d. B pays $500 at the end of 5 years (a total of one payment).

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