Please show how you got the work!!!!! Assume you have $12,000 in cash. You can d

Question

Please show how you got the work!!!!! Assume you have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2% semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10% on your investment. Regardless of the investment option you choose, you will have to cash in at the end of 10 years. Assume your brother is trustworthy and that both investments carry the same risk. Which investment option will you choose and why? Justify your answer using time value of money calculations and concepts

Explanation / Answer

Value of mutual fund investment at 10 years from now

=12000*(1+4.1%)^(10*2)

=26803.77

value of brother investment from 10 years now=11000*1.10^8=23579.48

so choose investing in mutual fund as it has higher investment value at end of 10 years

the above is the answer

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