Assume you have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2% semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10% on your investment. Regardless of the investment option you choose, you will have to cash in at the end of 10 years. Assume your brother is trustworthy and that both investments carry the same risk. Which investment option will you choose and why?
Assume you have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2% semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10% on your investment. Regardless of the investment option you choose, you will have to cash in at the end of 10 years. Assume your brother is trustworthy and that both investments carry the same risk. Which investment option will you choose and why?
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter6: Saving And Investing
Section6.2: Investing: Taking Risks With Your Savings
Problem 4R
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