Hello, Rose Wanjohi!
Are you waiting for some magic formula?
Do the math!
Deal (a) is just compound interest.A woman is offered (a) a lump sum of $100,000 to invest now
or (b) $55,000 to invest at the end of the year
and another $55,000 to invest at the end of the following year.
If both the investments are assumed to earn 7% per annum,
which should she choose if she intends to withdraw money after 2 years?
At the end of two years, she will have: .
Deal (b) is rather lame.
During the first year, she has no money invested.
At the end of the first year, she invests $55,000.
That earns interest during the second year.
. . It will be worth: .
Then she invests another $55,000.
So at the end of two years, she will have: .
Obviiusly, deal (a) is better.