Hi! this is Gregory and I need some help with my Math assignment. I really need help on this assignment especially #3 of this assignment. I have try to get it started, but I need to know if I am on the right track. Please help me, Thanks.
Envision that you have served as business manager of Media World for over 2 years. You have noticed that for the last 12 months the business has regularly had cash assets of $20,000 or more at the end of each month. You have found a 6-month certificate of deposit that pays 6% compounded monthly. To obtain this rate of interest, you must invest a minimum of $2,000. You have also found a high interest savings account that pays 3% compounded daily. Based on the cash position of the business at this time, assume that you decide to invest $4,000.
1. Assume that you will invest the full amount in a certificate of deposit.
a. What would be the future value of the CD at the end of the investment term?
1a) A= FV + P (1+i) n
$ 4,000 x (1 + 1)6= $ 4,000 x 64
FV= $ 256,000
b. How much interest would the investment earn for the period?
b) I= PRT
= $4,000 x .06 x 6/12= $120
c. What would be the effective rate of the investment?
c) A= P (1+i) n
P= $4,000
$ 4,000(1 + .06/4)4
= 1.061363551 -1
Reff = .061363551
Reff = 6.14%
2. Assume that you decide to invest the $4,000 in the high-interest savings account.
a. What future value would you expect to receive at the end of 6 months?
2a) A= FV + P (1 + i) n
$4,000 + (1 +1)3 = $4,000 x 8
FV = $32,000
b. How much interest would the investment earn for the period?
b) I = PRT
I = $ 4,000 x .03 x 6/12 = $60
c. What would be the effective rate of the investment?
c) A = P (1 + i) n
$4,000(1 + .03/4)4
= 1.030339191 -1
Reff = .030339191
Reff = 3.03%
3. Write a recommendation to the partners justifying a short-term investment of business funds at this time, recommending one of these investments. Include your analysis from questions 1 and 2 in your recommendation.