Question

You receive a $15,000 signing bonus from your new employer and decide to invest it for 2 years. Your banker suggests two alternatives, which both require a commitment for the full 2 years. The first alternative will earn 8% per year for both years. The second alternative earns 6% for the first year and 10% for the second year. Interest compounds annually. Which would you choose? Justify your choice by the calculations.

Answer 1

8% plus 8%

Step-by-step explanation:

8% plus 8% will yield 16.64% total and the 6% and 10% yields 16.60% total