If you are offered the following investment opportunity , which option will you
ID: 2817951 • Letter: I
Question
If you are offered the following investment opportunity , which option will you choose for the best interest earned if you can afford to invest a total of 20,000? You can invest multiple times an option given based on your available fund (20,000). Option 1, principal=10,000, rate =3%, T=Jan 1,2018-April 1,2018, Type of interest= ordinary, what is the interest earned if you have 20,000? Option 2, P=10,000, R=3%, T=Jan 1, 2018-April 1,2018, Type of interest=exact interest. How much is interest earned if you have 20,000? Option 3 P=10,000, R=3%, T=May 1,2018-Aug 1,2018, type of interest =ordinary, How much is unterest earned if you have 20,000? Option 4, P=10,000, R=3%, T= Sept.1,2018-December 1,2018, Type of interest earned =exact interest, How much interest earned if you have 20,000? What option you should choose?
Explanation / Answer
Ordinary interest means we calculate for 360 days.
Exact interest means we calculate for 365 days.
Option1 : Ordinary so 360 days
Jan1 TO April 1 = 91 days
So if we have 20,000 then Interest = 20,000*3%*91/360
= 151.666
Option 2: Exact so 365 days
Jan1 TO April 1 = 91 days
So if we have 20,000 then Interest = 20,000*3%*91/365
= 149.589
Option 3 : Ordinary so 360 days
May 1 to Aug 1 = 93 days
So if we have 20,000 then Interest = 20,000*3%*93/360
= 155
Option 4: Exact so 365 days
May 1 to Aug 1 = 93 days
So if we have 20,000 then Interest = 20,000*3%*93/365
= 152.876
As interest is more for option 3 . So I chose option 3
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.