Scenario: An investor is considering three different investment options. Investing in Option A pays him $4,000 after 6 years, investing in Option B pays him $7,600 after 7 years, and investing in Option C pays him $9,000 after 8 years. If he deposits the amount with a bank, he would receive an annual interest rate of 9 percent.
-Refer to the scenario above.If the investor plans to invest a sum of $4,000,which of the following statements is true?

Question

Quizplus · Accepted Answer

If the investor deposits the money in a bank, he would receive an annual interest rate of 9 percent. Using the formula for future value of a present sum, we can calculate the future value of each investment option:

Option A: $4,000 x (1 + 0.09)^6 = $6,196.71
Option B: $4,000 x (1 + 0.09)^7 = $7,924.68
Option C: $4,000 x (1 + 0.09)^8 = $9,743.47

So, the best investment option is Option C, which would give the investor a higher return on his investment. Option B is also a profitable investment option, but it gives a lower return than Option C. Option A is not a profitable investment option, as its future value is the lowest among the three options.

Scenario: an Investor Is Considering Three Different Investment Options