What’s My Interest?
Investment Challenge
1. John receives $1,000 as a graduation gift from his grandparents. Rather than spend it, he decides to invest it in a two-year bond that earns 3% simple interest. John doesn’t need access to the money right away because he wants to save it for when he’s ready to buy a home in about 10 years. Is the bond a wise investment for John? Why or why not? What other investment options does John have?
Yes, Because by the time john is ready to buy his home the bond should have gained enough money in interest so that now he has enough for a house.
2. If you had the choice between investing $1,000 in a mutual fund that earns 7.5% compound interest or a bond that earns simple interest at 7.5%, which would you prefer and why?
I would choose the mutual fund because since it is a compound interest it will earn more money.
Yes, Because by the time john is ready to buy his home the bond should have gained enough money in interest so that now he has enough for a house.
2. If you had the choice between investing $1,000 in a mutual fund that earns 7.5% compound interest or a bond that earns simple interest at 7.5%, which would you prefer and why?
I would choose the mutual fund because since it is a compound interest it will earn more money.