An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 34P
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Question
An investor has accumulated $6,800 and is looking for the best
Required:
- Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%.
- Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%.
- Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b.
Note: Round your answer to 2 decimal places.
Transcribed Image Text:An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings
account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800.
Required:
a. Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%.
b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were
invested for one year at 7%.
c. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b.
Note: Round your answer to 2 decimal places.
a. Amount of return
b. Net amount of return
c. Net rate of return
%
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