You have $12,000 to invest and want to keep your money invested for 8 years. You are considering the following investment options. Choose the investment option that will earn you the most money.

a.

3.99% compounded monthly

b.

4% compounded quarterly

c.

4.175% compounded annually

d.

4.2% simple interest

P = $12,000

a) A = P * (1 + r) ^n

r = 0.0399 : 12 = 0.003325

n = 8 * 12 = 96

A = 12,000 * (1.003325) ^96 = $16,503.58

b) r = 0.04 : 4 = 0.01

n = 4 * 8 = 32

A = 12,000 * (1.01) ^32 = $16,645.29

c) r = 0.04175, n = 8

A = 12,000 * (1.04175) ^8 = $16,645.20

d) r = 0.042

I = 8 * 12,000 * 0.042 = $4,032

A = P + I = 12,000 + 4,032 = $16,032

Answer:

The investment that will earn the most money is:

C) 4.175 % compounded annually.