Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 31

With $10,000 available, you have two investment options. The first is to buy a certificate of deposit from a bank at an interest rate of 9% annually for five years. The second choice is to purchase a bond for $10,000 and invest the bond's interest in the bank at an interest rate of 5%. The bond pays 6.5% interest annually and will mature to its face value of $10,000 in five years. Which option is better Assume that your MARR is 5% per year.