Two different investment alternatives

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1. Harold begins a savings program immediately after college, depositing $200/month in an account earning interest (compounded annually) at 7%. He does this for 30 years. His buddy, Wayne, doesn't begin such a savings program until he has been working for 10 years, and so saves $200/month for twenty years, earning the same interest. How much does each fellow have at the end of the 30 years?

2. Evan is examining two different investment alternatives: option A would require an annual deposit of $2000 and would earn interest (compounded annually) at 9%. Option B would require an annual deposit of $1500 but would earn interest (compounded annually) at 12% (it's more risky). Which option would you advise him to take? Show your calculations and defend your answer. (Hint: this is really a discussion question!)

Reference no: EM131996368

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