1) You have $2500 to invest, and you have two options: Option A: 1.725% compound

Question

1) You have $2500 to invest, and you have two options:

Option A: 1.725% compounded semiannually
Option B: 1.675% compounded continuously.

(a)    Calculate the annual percentage yield for each option. (Round your answers to three decimal places.) Option A ___________, Option B _________________

(b)   Calculate the future value of each investment after 2 years and after 5 years. (Round your answers to two decimal places.) Option A 2 years ___________, 5 years_____________, Option B 2 years _______________, 5 years_____________

Explanation / Answer

part B

option A

2 years .... 2500*(1 + 0.01725 / 2  )^4 = $ 2,587.37

5 years .... 2500* ( 1 + 0.01725 / 2  )^10 = $ 2,724.19

option B

2 years..... 2500*( e^(0.01675) )^2 = $ 2,585.17

5 years ... 2500*(e^(0.01675) )^5 = $ 2,718.39

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