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Math Help - Accounting-Comparing investment alternatives

  1. #1
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    Accounting-Comparing investment alternatives

    Hello,

    I answer each section of the problem; but I do not understand which is the best alternative out of interest earn or rate of return.

    a.) Calculate the interests earn on the savings account for six months.
    I = Principal*Rate*Time
    I = ($4800) (0.055) (0.5)
    I=132

    b.) Calculate the rate of return if the money is lent to Judy.
    Rate of return = Amount of return
    Amount invested
    = $5,100
    $4,800
    = 1.0625
    = 1.0625
    = .0625
    =6.25

    Which alternative would you recommend?
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  2. #2
    MHF Contributor
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    Quote Originally Posted by Lydia08 View Post
    a.) Calculate the interests earn on the savings account for six months.
    I = Principal*Rate*Time
    I = ($4800) (0.055) (0.5)
    I=132

    b.) Calculate the rate of return if the money is lent to Judy.
    Rate of return = Amount of return
    Amount invested
    = $5,100
    $4,800
    = 1.0625
    = 1.0625
    = .0625
    =6.25
    Depends on what Judy can get after 6 months if she takes option a)

    As it is, she'll get $300 revenue using b)
    But if she invests at (as example) 10% after 6 months,
    she'll het 4800 * .10 / 2 = $240; 240 + 132 = $372
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