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.

Question

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?

Answer 1

125,000 invested for 6 months
= 125000(1.025 = $128,125

So what do you think?

Answer 2

didn't see the "monthly" part

rate = .05/12 = .0041666...
amount = 125000(1.00416666...)^6 = $128,157.73