Question

You have $12,000 to invest and want to keep your money invested for 8 years. You are considering the following investment options. Choose the investment option that will earn you the most money.
a.
3.99% compounded monthly
b.
4% compounded quarterly
c.
4.175% compounded annually
d.
4.2% simple interest


Please select the best answer from the choices provided

Answer 1

Compute the amount after 8 years for each option (P = 12,000):

a) 3.99% compounded monthly:
A = 12000(1 + 0.0399/12)^{96} ≈ $16,503.64

b) 4% compounded quarterly:
A = 12000(1 + 0.04/4)^{32} ≈ $16,499.90

c) 4.175% compounded annually:
A = 12000(1 + 0.04175)^{8} ≈ $16,645.70

d) 4.2% simple interest:
A = 12000(1 + 0.042·8) = $16,032.00

The largest amount comes from choice (c).