Which of the following investments has a larger future value: Investment A, a $1,000 investment earning 5% per year for 6 years, or Investment B, a $500 investment earning 10% per year for 6 years, with a bonus of an extra $500 added at the end of the six
A) Investment B, with a future value of $1,386.
B) Investment A, with a future value of $1,386.
C) Investment A, with a future value of $1,340.
D) The investments have equal value.
Answer: A
Explanation: A) Investment A: FV = PV ∗ (1 + r)n = $1,000 ∗ (1.05)6 = $1,340.
Investment B: FV = PV ∗ (1 + r)n = $500 ∗ (1.10)6 + $500 = $1,386. The future value of Investment B is larger than the future value of Investment A by $46.
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