Scenario: Consider the following two options. You can either invest $30,000 in a bank that offers you an interest rate of 6 percent compounded annually for 30 years, or you can lend $30,000 to your friend for 30 years at an interest rate of 10 percent compounded annually.
-Refer to the scenario above.If you lend $30,000 to your friend for 30 years,you will receive ________ when she repays the amount after 30 years.

Question

Quizplus · Accepted Answer

If you invest $30,000 in the bank at 6 percent compounded annually for 30 years, you would have:
$30,000(1+0.06)^30 = $145,770.62

If you lend $30,000 to your friend at 10 percent compounded annually for 30 years, you would have:
$30,000(1+0.10)^30 = $523,482.07

Therefore, lending $30,000 to your friend at 10 percent is the better choice, as it will give you a higher return on your investment.

Scenario: Consider the Following Two Options