Yuri is willing to invest $30,000 for six years, and is an economically rational investor. He...

Yuri is willing to invest $30,000 for six years, and is an economically rational investor. He has identified three investment alternatives (X, Y, and Z) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year investment period, complete the following table and indicate whether Yuri should invest in each of the investments.

Note: When calculating each investment’s future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar.

Investment	Interest Rate and Method	Expected Future Value	Make this investment?
X	11% compound interest
Y	13% compound interest
Z	13% simple interest

Solutions

Expert Solution

Yuri's problem deals with the finding of Future value of the investment given it's Present value (PV=30000), No of Years Invested (N=6), (R), rate of interest, Varies with situations

Our formula to find Future value factor is as follows. We will multiply it with our invested amount to get the Future value of security.

FV Factor (For Compounding Annually) = (1+(R/100))ⁿ

FV Factor (For Simple Interest) = (1+(N*(R/100)))

Where 'N' being the no of years for which investment is done and R being the rate of Investment

Below table shows the calculations for Optimum investment

So, investment Y will result in the highest future value for the investment. Yuri should go with Investment Y.

Thumbs up expected

jeff jeffy answered 1 month ago

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