Question
Richard Simons is selling his house. He has a choice of taking $125,000 today or $135,000 in 6 months. If he takes the money today, he can invest it at Valley Bank at 5% interest compounded monthly.
a) How much would be in the account after six month if he took the $125,000.
b) Which option should he take?
c) How much more money does he gain in making this choice?
a) How much would be in the account after six month if he took the $125,000.
b) Which option should he take?
c) How much more money does he gain in making this choice?
Answers
Reiny
125,000 invested for 6 months
= 125000(1.025 = $128,125
So what do you think?
= 125000(1.025 = $128,125
So what do you think?
Reiny
didn't see the "monthly" part
rate = .05/12 = .0041666...
amount = 125000(1.00416666...)^6 = $128,157.73
rate = .05/12 = .0041666...
amount = 125000(1.00416666...)^6 = $128,157.73