Question

A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and requests assistance to help understand which option would be the best for his investment.

Option 1: 6% compounded interest quarterly for 5 years.
Option 2: 8% compounded interest annually for 5 years.
Option 3: 14.5% simple interest for 10 years.

Answer 1

Do you know which formula to apply?

Answer 2

no

Answer 3

Look up for the Simple Interest and Compound Interest, then post here!
I'll show you how to apply :)

Answer 4

interest=principal*rate*time simple

Answer 5

Yes, at least memorize the formula:
Simple Interest I = P r t
" Option 3: 14.5% simple interest for 10 years "
Now can you plug in to find I?

Answer 6

is that the way to get all three answers i have to explain step by step

Answer 7

No, it's my explanation to you!

Answer 8

Can you plug in to find the Interest in option 3, now?

Answer 9

Use the formula\[A =P(1+\frac{ r }{ n })^{nt}\] where P is the principal amount invested at interest rate r compounded n times per annum (year), with nt time periods in t years.

Answer 10

@Chlorophyll, this is not a simple interest problem!

Answer 11

" Option 3: 14.5% simple interest for 10 years " is simple interest choice!

Answer 12

Oh yes, option 3 is simple interest. Sorry, I thought you were talking about options 1 & 2.

Answer 13

I select the easiest option for him but he's unable to understand it :/