A person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% perannum, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes moreattractive?

In simple interest there is no interest on interest and there is interest on principal amount only…

person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% per num, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes more tractive?

person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% per num, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes more tractive?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

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A person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% per
annum, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes more
attractive?

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